Personal Finance

Household budgeting in the Post Demonetisation era

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The sudden demonetisation of the Rs. 500 and Rs. 1,000 currency notes - which formed 85% of the cash in circulation – on November 8, 2016 made all of us go through difficulties paying for our daily consumption needs. That demonetisation phase has passed.

The Reserve Bank of India (RBI) has since put in circulation cash in Rs. 500 and Rs. 2,000 denominations to replace most of the withdrawn currency notes. We are almost back to the pre-demonetisation days. Does this mean we should return to our old cash habits? Or should we move permanently to less cash habits?

The answer is we should increasingly adopt digital as the preferred mode of payment. No one can say we should completely stop using cash. That is not feasible. What we need to do is use cash only where there is no digital alternative.

So here is how we can digitally manage our daily or regular expenditure.

Daily commute

Buy a monthly pass using your credit or debit card for travelling by public transport means like bus, train, or metro. Availing services of taxi hailing apps like Uber and Ola can always be without cash. These apps give you the option of paying digitally. If you use your own vehicle to travel, then the solution is the easiest – pay for diesel or petrol using a card.

Food and Drinks

Most eating joints have POS terminals installed facilitating payments via cards. You will need cash only if you decide to buy eatables from a street food vendor. There is every possibility that you may not need to use cash for eating and drinking.

Groceries

Purchasing your monthly requirement of groceries from large format retailers like Big Bazaar, DMart, or Star Bazaar can absolutely be cashless. Even your neighbourhood stores have not begun to accept cards and/or other digital options like PayTM. Cash can be nearly eliminated for purchase of Groceries too. You may need cash for emergency purchases but that would be negligible.

Utility bills

Every month, we need to pay for using electricity, fixed-line phone, mobile, and broadband. All these are services for which payments can be made digitally. Companies that provide these services will have digital payment options including online payment to make your experience hassle-free.

Other expenses

We get our newspaper/s from newspaper vendors and milk supplies from milk vendors. We also require sliced bread, eggs, and other regular consumption items. A little cash might be required for some of these expenses. Payments for newspapers and milk can certainly be moved to a digital platform. If there is no option, get the bank account details of the newspaper vendor and milk vendor and transfer money to their accounts directly through net banking or transaction apps of banks.

Rent & EMIs

EMIs for our home loans, car loans, etc. can be directly debited to our bank accounts through electronic clearing service (ECS) mandates. Avoid paying rent in cash, even if partly. Rent is a substantial expense and paying it entirely through digital means can reduce your cash requirement to the bare minimum. There are about 1.3 million point-of-sale (POS) terminals installed in India. Most banks have transaction apps using which money can be transferred to other bank accounts & payments can be made to billers. Along with this, there are many more payment apps being launched for the public. There is already a huge infrastructure in place to depend less on cash and rely more on digital platforms; to substantially increase personal consumption expenditure incurred digitally.

Notwithstanding the fact that only about 5% of personal consumption expenditure is incurred digitally currently, the country is in a phase where digital infrastructure is increasing and what is required is for consumers to adopt digital.

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