Let's make some money

By Nilesh Shah
Let’s begin the new year with a tip on how to make money. There are just two ways - be very lucky, or be disciplined. I cannot help you with luck, but discipline is what one can work on.
Money saved is money earned. This proverb applies perfectly on the discipline to make money. There are a number of bills we pay every month - multiple mobile bills, electricity bill, petrol or diesel bills, restaurant bills, shopping bills, newspaper bills, equated monthly instalments on car and house, school or tuition fees, insurance, etc. These are part of our regular monthly expenses.Then, there is that occasional lump sum expense —purchase of consumer durables, gold or other precious metals; domestic or foreign travel expenditure (fare, hotel and other leisure activity), etc.
We generally withdraw cash to pay for these expenses. Some of us may make some payments by cheque. Some of us may settle some payments by direct debit facility. Some of us pay in advance to save on defaults or penalties. Most pay well ahead of due date to avoid any inconvenience. Many of us maintain multiple bank accounts for direct debit instructions in different accounts. In essence, we don't stretch our money to the maximum extent possible.
On the other hand, inflation goes up and down on a reported basis. The experience of common man is of one-way street on the household budget. It makes sense to stretch money from being spent. There is a considerable loss of interest, as people draw cash to make payments. Generally, all of us draw cash on a lump sum basis towards the beginning of a month to make payments. Cash remains at home, yielding no return. We make payments in advance rather than on the due date, thus losing potential interest income. We do this in the age of online payment and ATM. The mind is yet to forget the experience of long queues and physical payments. There is a simple way to stretch this spending.
Route all the payments through direct debit from your credit card. All the spending mentioned above and more can be settled through credit cards. The advantages of such arrangements are many.
First, your payments will be streamlined from one source. No need to maintain multiple bank accounts. You will be able to deploy money stuck in multiple bank accounts in a higher yielding manner.
Second, your payments will be made on the due date or during the grace period, avoiding potential loss of interest. Your money will be with you till the maximum possible time, helping you earn more.
Third, you have to make credit card payment after a gap of about 15 to 45 days after the actual spend. This is a credit given to you for free. You can earn extra interest on that float.
Fourth, most credit card companies reward you for spending done through credit cards. These reward points are bonus and turn out to be a decent number.
Fifth, spending through credit cards will streamline your expenses and maintain good record for reference. Most credit card companies send annual statements, summarising expenditure across major heads and raising red flag for unnecessary spending.
Care should be taken while paying credit card bills on due date, as interest on credit card dues are higher than normal. To summarise, routing all payments through credit card results in better record, gets credit from card companies, earns reward points and earns float income.
Most credit cards are issued free with sufficient limits to implement this strategy. Obviously, this is not a large saving, but remember, an ocean is made with little drops of water. Wish all of you a very joyous 2012. Happy saving.