The moment I forego my government job, I was asked by my parents, my relatives and members of my extended family to slow down on my expenditures. I have never been known for saving money, but here I was asked to cut down on some of my expenses which I thought was very necessary for keeping pace with the world !
I thought it would be real difficult if I were to cut my expenses and live a frugal life. For instance, it involved moving in with my parents, cutting down on my inflated phone bills, taking Activa(Scooter) for a ride rather than my car far too often and buying less clothes and other non-essentials. Then viewing it that way, it didn’t seem that difficult.
But when I started living like that, it became evident to me that I can’t follow this lifestyle and hence rather than cutting my expenses a lot, I started some startups, burned myself a lot but made some quick money. I have got tired of working like this and thought of a way to earn, without really doing anything !
This post is for all those who don’t want to burn themselves out with work 🙂
This is about real frugality, a way of living which made Mr M (he is a known) earn Rs 55,000 a month right now from a mere Rs 5500 some 16 years back, without ever doing a job or a business in any sense! Mr M was making some 5500 from post office monthly income scheme in the year 2001 from the money his father gave him. Post office MIS scheme as it is known gives you monthly interest on your fixed deposits parked with them. He quickly realized a potential in private money lending business where one person lends money to the other ordinarily at a very high interest rate than what the banks charge. He gave some amount to those in need for a fixed interest, with interest amount to be paid every month to him.
Those of you who don’t know this market, this is a real big market with a size in double of those covered by formal lending institutions likes banks and other financial institutions. Many P2P lending institutions based on this model have cropped up in recent times in India. Some of them are faircent, lendbox, loanmeet etc, which help borrowers meet the ones who have excess funds at their disposal. But then again, even these web portals don’t take any responsibility of debt repayment, they at best have a RBI approved recovery agency on contract. At a time, when banks are giving you just 8.5-9.0% interest rate on your fixed deposits, you can earn in tune of 18-36% by giving your money to others. Sure a lucrative but risky business.
In a bank, your fixed deposits get doubled every 8 years or so, but here in the informal money lending business, your money gets doubled in just 3-4 years !! Recovery in this business can be tough as the high interest rates make it very hard for the borrowers to repay your money on time, essentially making it a business involving a lot of ‘Muscle Power’ but Mr M only gave money to his relatives and to other known people in the society for securing his debt. There is yet another practice whereby the lender asks something from the borrower in return to keep him motivated to repay his debt (a strategy used extensively by my Grandfather!).
You can also ask the borrower to sign a promissory note though is not that enforceable in the courts. Virtually its a lender risk oriented business, but it has its rewards. But, this strategy of giving money in your circle paid off for him as borrowers didn’t default to maintain their reputation in the society. The strategy keeps on doubling Mr M’s money, with Mr M just having to visit the borrowers on the 1st of every month to collect the interest from them. But, he went for the double whammy by opting for frugal living too. He adopted a number of ways to decrease his costs. Some of them are:
- He doesn’t possess any vehicle. Since he lives in a small city, he prefers walking than taking an auto. He can walk for 3-4 km and back without taking one. Thus, there are no or minimal expenditure in his books under the header ‘Travelling’.
- He seldom shops for clothing and electronics. He is still using an old mobile phone and prefers to recharge it once a month with a limited call recharge voucher! There is no internet connection on his phone, doesn’t get entertained by WhatsApp or facebook (Read: that’s never been used) and mostly lives at his home or walks in nearby areas.
- He doesn’t use electricity much. Takes a bath with cold water even in winters. Lights and other electrical appliances are used very judiciously.
- Rather than taking ready to eat food from the market, he gets them raw and process them at home, which comes way to cheap.
- Groceries and other fruits and vegetables are bought from a wholesale guy by walking some 3 km, unimaginable.
He is a real fun, a big foodie and loves watching old movies and cricket. Plus all the above measures have helped him to manage his monthly budget under Rs 15,000. What is amazing is that, I have started liking some of his ways of living. Like I should go for long walks to do household works not because that’s cheap and saves transportation cost, but because that’s good for my health. Using too much of Viber, WhatsApp or Facebook has taken a toll on my eyes and I wish I could get away from them or not use them at all. Saving electricity is not bad and I for one, have started switching off the lights when not in use. Ready to eat food is then again not that a healthy choice and I think the more I gets closer to nature, the more healthy I can become. Right now, Mr M is earning Rs 55,000 a month from his private(informal) money lending activities and spending around Rs 15,000 a month. He is damn healthy for doing all these extra efforts and looks younger than his age.
After all, frugality is not that bad!