Personal Finance Continued

Accumulation of corpus

For a salaried employee, initially it may be difficult to find surplus cash to invest. This is because, till this time one would have identified and may be using various avenues to deploy the salary on a monthly basis.

To get surplus, there are two ways in this situation. First, increase income sources and second reduce expenses. First one may be difficult and may take time. The second one is more redily doable.
For controlling expenses, one needs to take a closer look at the cash flow out(expenditure) to identify avenues where one can save without compromising on quality of life. If quality is compromised, there is a great chance of the measure initiated, may not be implemented consistently. One can see this effect in diet resolutions of an individual. If one starts dieting suddenly and without much commitment, the measure will be abandoned sooner or later.

While studying expenses, one can identify spend based on needs(like groceries, school fees etc) and wants(commute by car, mobile plans) and nice to have(eating out, movies etc). When auditing, it can start from third and go to the first. In this audit one needs to identify how much of an expense can be reduced without compromising on quality. This audit will point to avenues where one can check and reduce expense without much loss to quality of life.

This is not a one time exercise and is to be repeated regularly to improve the disposable income which can be channeled to build corpus.

I tried this method myself and could cap my monthly expenses at a level, which remains more or less same month after month. This leaves me with a decent sum to invest and increase my corpus.

Please share your comments / suggestions.