MONEY MANAGEMENT: Setting up a festival fund, preparing a precise budget and sticking to it will help cut unnecessary expenses
Festive season puts everyone in a happy mood, making them more willing to indulge and splurge. From traditional purchases such as new clothes, consumer durables and jewelry, Indians are expanding their festive shopping lists to include aspirational and big-ticket transactions, such as fancy cars, lavish homes and exotic holidays. It would not be an exaggeration to call the festive season in India a 'Great Shopping Festival'.
Brands capitalise on this festive spirit to offer tempting deals and discounts, making it more attractive for consumers to loosen their purse-strings. No doubt, festive season turns out to be the most expensive time of the year for many, derailing them from the path of prudence and wise financial choices. If you face similar conundrum every festive season, below are a few simple measures that you can take to enjoy the festivities this year without straining yourself financially:
Stick to the budget
As the tendency to go overboard with spending is high during the festive season, it would be advisable to determine a budget to stay in check. Draw up a list of expenses that you deem absolutely necessary and be as precise as possible. For instance, if you are setting a budget aside for gifts, set a budget for each person on your list. Next, decide the amount that can comfortably spend based on your monthly income and expenses. Post this exercise if you realise that all your expenses are not fitting in your budget, try prioritising. Put necessities ahead of wants. Avoid spending on items which you can buy post the festive season as well. Try resisting the urge to use credit cards for indulgence, as high-interest on such transactions create a debt trap, causing much financial distress.
Shop wisely
A shopping list is a great way to avoid such impulse purchases. Once the list is ready, scout for relevant deals and offers. Do not fall prey to marketing gimmicks which entails first inflating the price and then offering a 'festive' discount on the same. Do a thorough research and read between the lines to avoid such traps. Online shopping can be a viable option to avoid the rush. It saves both time and money by allowing you to compare product features and price. Opt for cashback deals wherever possible. If you have accumulated loyalty points on your membership cards, redeem them.
Build a 'Festive Fund'
While waiting for the festive season to begin, how about setting aside a certain sum of money per month towards a special 'Festive Fund'? Creating such a fund will ensure that you have enough resources to foot your festive season expenses without unnecessary stress. Add a 20% mark-up to the expenses you incurred last year and divide this amount by 12 to arrive at the monthly figure that you must contribute towards this fund. You can also explore short-term debt funds as an investment option. By sticking to this fund for financing your expenses, you can keep your unplanned expenses in check.
Plan your big-ticket transactions
If you have set your mind on booking that house or buying your dream car during the festive season, make sure to work towards these goals in a systematic manner. The approach to big-ticket transactions is not much different from your run-of-the-mill shopping. Just the way you compare discounts, deals and freebies before making a purchase, do a thorough market research of what is on offer before signing any deal. Read the fine prints and seek advice from experts if you feel the need. Similarly, while applying for a loan, gain as much clarity as you can on your requirement and application process. To minimise your loan payments, maintain a healthy crdit score and negotiate with your bank for better rates.
All that glitters is not gold
Every year, the markets witness a surge in gold buying. This 'shopping' is termed as an 'investment' as many believe that the yellow metal is a hedge against future uncertainties. But gold offers no regular income other than value appreciation. Buying jewelry is advisable for consumption purposes but not investment. If you are looking at the yellow metal from an investment perspective then a smart alternative would be to buy gold ETFs which are traded on the exchange and offer returns as per the price of physical gold. It will also save you the cost of keeping your gold jewelry in safe custody.
Do save
Just because it's the festive season does not mean that you should break away from good financial habits. If you get any bonus during the festive season, ensure that you save and invest a chunk of it before spending. Be mindful of your finances to ensure that you do not jeopardise other financial goals due to overindulgence in the festive season.
The writer is MD & CEO, Axis Securities
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