I started tech budgeting and you should do it too
Before going to bed one-night last month, I got a text message: “You have spent…
Before going to bed one-night last month, I got a text message: “You have spent Rs 459 via debit card at Amazon.” I read the message and slept. Later, in the morning, when I woke up I read the message again and wondered why Rs 459 was charged to my debit card. I then checked the Amazon app and realised I forgot to turn off auto-renewal. Rs 459 is not a huge sum but it pinched me a lot when the money was deducted from my account for a service I no longer use. That day I realised I need to seriously understand my monthly expenses better, especially the amount spent on services and apps. I am not trying to be a personal finance expert but I want to share my experience and a few tips you can apply to better manage your tech budget.
Understand where your money is going
Whether you are a student or a working professional, start paying attention to the basic fundamental components of financial literacy. Nobody will tell you what is more important: a coffee at a cafe or paying the EMI of your smartphone before the due date? The point is to understand the benefits of financial literacy so that you know where your money is going. Every penny matters. Until a few months back, I was randomly purchasing vintage gadgets on OLX and because of that, I messed up my finances. I still buy vintage gadgets but now I look at my bank balance and review my spending before buying anything new.
Allocating monthly budget for streaming services
About a month back, I logged into my savings account and started calculating the money I spent on subscriptions. To put it simply, it was a shock, especially the fact that there were so many monthly subscriptions I had forgotten about. It is easy to subscribe to subscription services, but hard to keep using them or to keep a tab of what you are spending on these.
First, let me tell you how many subscription services I have subscribed to:
Xbox Game Pass
Disney Hotstar Plus
Apple TV Plus
Here’s what I did to cut down on my expenses on streaming and subscription services.
Identify the services you can cancel
Sit down on the weekend and figure out which services to keep and which ones to cancel. For example, if you have signed up for Netflix and lately have not been watching any shows that appeal to you, simply cancel the subscription. It may save you Rs 499 a month. Instead, save the money for another important financial goal, such as travelling or paying EMI for the laptop you just bought. The good thing about these services is that you can go back anytime and resume whenever there is a show coming that is interesting enough.
Choose the basic subscription tier
I know people whose only mode of entertainment is access to Netflix or Amazon Prime since they don’t have cable at home. I will tell them to choose the basic, non-premium subscription tier and save some cash. Netflix, for example, costs Rs 149 for a mobile-only plan. Opting for that plan makes a lot of financial sense if your viewing is limited to mobile. Before subscribing to any service, ask yourself if you really need the super-premium subscription plan. Like, Disney Hotstar Plus offers three tiers and each plan costs more than the other. Its Rs 1,499 annual plan is pointless if you don’t have a 4K TV at home but four people can log in using the same account and enjoy content ad-free.
Look for a bundled plan
Instead of subscribing to individual services, opt for a bundle that brings a lot of services under one umbrella. I don’t know if you have heard about Apple One, it’s a services bundle that brings together Apple’s premium services offerings, such as Apple Music and Apple Arcade, at a discount. I recently subscribed to the Apple One Individual Plan, where I got access to Apple Music, Apple TV Plus, Apple Arcade, and 50GB of iCloud Storage, all for Rs 195 a month. Previously, I was paying individually for Apple Music and Apple Arcade, and both services cost more than Rs 200 a month. Another reason to choose the Apple One bundle is Severance on Apple TV Plus, a show I am currently hooked to.
Hot tip: Make sure you are aware of the mobile data plans that come with free access to popular streaming services. Reliance Jio, Airtel and Vi (previously Vodafone) have prepaid and postpaid plans with a free subscription to streaming services.
Dedicate a monthly budget
This is probably the biggest lesson I learned about money in the past decade. Not only does budgeting help you reach your financial goals if you stick to it, but documenting every expense incurred in a month is a smarter move in the long run. Here’s how to do it.
A fixed sum for streaming services: Commit a budget that you need to spend on streaming and subscription services. A simple way to divide it is by using the 50/20/30 rule of budgeting. Essentially, you are breaking your income into three parts: 50% of your income goes to basic needs (house rent, groceries, etc), 20% goes to savings (and debt repayment), and 30% is to spend on personal use (eating out, streaming services, etc). If it works, a monthly budget will give a lot of flexibility. In my case, I have figured out which services I want to use and based on that I am dedicating a monthly budget. For me, the biggest challenge is to get into the habit of knowing how much I have to spend each month.
Track where your money goes: Write it down on paper, maintain a spreadsheet or use budgeting apps, and note down every expense you have for a month. The ability to make better financial decisions is what you need to learn and that too quickly.
Categorize your expenses by type: I might be paying a little more on PlayStation Plus but I don’t have to pay bank or credit card companies for a new iPhone 13 in the form of monthly instalments. I have the liberty to cancel the subscription to PlayStation Plus any day, but you don’t have the option to skip the monthly instalment and pay it later.
Leave room for flexibility in your budget: I have seen people who allocate a monthly budget with great enthusiasm but are unable to stick to a budget when their income is not stable. This is the hard reality. Budgeting can be a lot difficult when your income is not stable or spending is consistent. You know you are planning a trip to Dharamshala, so your tech budgeting needs to be done accordingly. Can I cut back on a premium subscription to Spotify for three months and dedicate that money to renting a bike instead? Understand that your income or spending varies on a monthly basis. You don’t have to cut back on everything; it’s all about priorities in life.