Take note, spenders: Refinance your loans, find ways to curb expenses

Among key belt-tightening measures, discretionary expenses are easier to pare

New Delhi-based Kapil Dev Bhagat, 50, started a travel agency two years ago. Just when his business seemed ready to take off, the Covid-19 pandemic broke out.

“My earnings have plummeted to near zero for the past three months,” he says.

With the situation unlikely to improve any time soon, Bhagat has been on an austerity drive, hunting for every possible avenue to curtail expenses.

Here are a few suggestions for those who find themselves in financial dire straits.   

 

Where is the money going?

Note down each expense for a month. “Divide expenses into discretionary and non-discretionary categories. There will be less scope for reducing non-discretionary expenses, like grocery, utility bills, children’s school fee, insurance premium. Focus more on reducing discretionary expenses,” says Ankur Maheshwari, chief executive officer, Equirus Wealth Management.

Branded clothes, home-delivered food, beauty and grooming products, hobbies, club membership are expense items that offer greater scope for reduction. 

   

Refinance loans

Many home loan borrowers are still paying higher interest rates than the best available in the market as they are on loans linked to the older benchmarks like the marginal cost of funds-based lending rate or the base rate.

 

 

“Borrowers can achieve considerable savings by doing a balance transfer,” says Vishal Dhawan, chief financial planner, PlanAhead Wealth Advisors.

Those with high-cost debt, like credit card or personal loans, should refinance them at a lower rate. “Many public-sector banks are offering Covid-19 personal loan at 7-7.5 per cent. Use this money to pay off your higher-cost loans,” says Deepesh Raghaw, founder, PersonalFinancePlan. You may also use top-up home loans, which are available for 7.75-9.9 per cent, for this purpose.

Negotiate with landlord

If you have suffered a job loss or a salary cut, speak to your landlord to see if he will reduce your rent. If he does not agree, see if he will lower the rent for the next six months. Moving to a smaller apartment is another option you may consider.

If your office allows work-from-home for a prolonged period, shift towards the periphery where the rent is lower.

If your rent is up for revision, negotiate for a smaller hike — not the customary 10 per cent.

Reduce internet bill

With home internet usage surging, you should make an effort to rein in this cost.

First, choose the right data plan based on the amount of usage. Most providers have a fair usage plan (FUP) limit. Say, if you pay Rs 1,500, your WiFi service provider may give you 200-300 gigabyte of data at 10 megabytes per second (Mbps), after which the speed declines to 2 Mbps. “It is smarter to upgrade to a plan where the FUP limit is higher,” says Udbhav Tiwari, public policy advisor, Mozilla.

Two, don’t view all video-based content at the highest quality. Reduce the quality setting where feasible.

Three, make sure the apps running in the background don’t consume data. Mobile operating systems and Windows 10 offer data-saver WiFi mode.