Now that we’ve been doing ‘Question of Money’ videos for a while, one question we are asked a lot is, “Can you suggest a pay cheque routine?” A paycheck routine is an organised way to deal with your income every month. Without it, you may simply spend whatever is in your account. This can quickly land you in a situation where your account is empty by the end of the month.  In this episode, let me suggest a simple pay cheque routine, which I will call ELSI.  

ELSI expands into Essentials, Loans, Savings and Indulgences. This is the order in which you should spend your salary as soon as it lands in your account every month.  


The first obvious thing to do as soon as your salary credit lands is to take care of payments for the essentials that keep you going. In the olden days, it used to be roti, kapda and makaan.  But today, this should be your rent and maintenance payments, gas, electricity and internet bills, phone bill, perhaps setting aside a sum for your food and conveyance expenses for the month. This may seem obvious, but many folk actually forget to pay their internet, gas or electricity bills and scramble to do it after connections are cut.  Many of these payments can now be automated using the billpay feature in your bank account. It may be best to automate, as that will ensure zero skipped payments.  For young people who stay away from their families, sending money home may also be critical and that should also be counted as part of essentials.  


I know there’s actually a debate on whether you should invest in SIPs before you pay EMIs. To my mind that’s a silly debate. If you don’t repay loans on time, the interest can add up in no time to a sum that is simply unmanageable. Compounding is a super powerful force. Never let it work against you!. Loan repayments and EMIs should take priority over saving, investing and all non-essential expenses. Therefore, after you’re done with paying for utilities and essentials, get to EMIs. If you have loans that are not on EMIs, set aside a fixed sum towards repaying it every month. Having that auto debit land in the early part of the month can help you steadily chip away at your loans until they disappear.  

Saving and investing  

In our earlier videos, we’ve explained why if you want to get to your financial goals, you need to cultivate the habit of saving before spending. Beginners should look to save at least 15% of their salary, taking it up to 20-25% by the time their career peaks. To do this, your pay cheque routine must also include monthly auto debits to your bank accounts towards recurring deposits or SIPs in mutual funds.  Set the dates for these debits just after your utility bills but before other expenses afre likely to hit your account.  


Sums that are left over in your account after ELS are done with, can be splurged towards eating out, shopping, movies, pubbing and the works. There’s no harm in indulging yourself when you are earning well. You only have to make sure that the indulgences don’t eat into future pay cheques by landing you with credit card debt or personal loans.   

(Host: Aarati Krishnan, Producer & Edits: Anjana PV, Camera: Bijoy Ghosh, Anjana PV, Rowan Barnett & Siddharth Mathew Cherian)