“Festival season is here, I need to take an advance”, “So much to buy, and so little to spare”, “Gosh, a new cracker? I hope my kid doesn’t know about this” - Some common dialogues we get to hear from parents, as the festival season nears. Year in, year out, we say the same, and yet we refuse to learn the lesson we desperately need to learn.
What lesson is that?
Be Prepared! We know that the festival season comes in this period of the year, and we know these expenses are bound to incur, then why not prepare for it?
Here are a few pointers that can ease the such financial burden.
Income allocation
Most people tend to allocate their income into very broad categories like household, education, savings and investment. Break it down further. Allocate a portion for festival expenses, right from the start of the year. And it is equally important that you direct it toward an avenue with high liquidity, such as a (super) savings account, or deposits, or liquid funds.
Account for inflation
Keep increasing that allocation every year. When the prices increase, it is only logical that you increase your allocation too. A marginal increase will ensure that everyone gets what they want, without having to drop any item from the list.
Avoid credit
I can guess a few people thinking “why do all this when you can get a loan or credit before the festival?” There are 3 disadvantages to that idea:
- You’ll miss out on the interest you would get by investing/saving that amount
- You’ll incur extra expense in the form of interest payment
- Let’s say your festival expenses are ₹10000 when you pay out of your pocket. In the confidence of having procured a higher amount as a loan, you’ll end up spending ₹15000 or 20000, not to mention, the interest on this huge expense.
Think like a pessimist
Pessimism is a highly underrated concept in planning. Unless you know the happenings of the next second, for all your family members, you need a plan B. An optimistic outlook reveals the beautiful side of life, but pessimism keeps you from falling into the darker side. Regularly reviewing your insurance policies, will, nomination, and contingency funds ensures a strong financial backing.
Beware of the ‘Offer Trap’
A month before the festive season, we’re bombarded with advertisements for discounts and freebies. It is only natural for us to be tempted by this illusion of better worth. But remember this - There are NO Free Lunches! The intention of such sales strategies is to make people buy more than they may actually need.
Here’s a simple example to illustrate this point. You require 2 shirts. During the non-offer period, let’s say a shirt costs you ₹100. And the same shirt costs you ₹80 during the offer / Festive period. Tempted by the offer, you may want to buy 3 shirts, instead of your actual requirement of 2 shirts. If you stick to your original plan of buying 2 shirts, you’ll end up saving ₹40. If you get tempted into buying more, you’ll end up spending an extra ₹40.
Hope these pointers help you plan your finances better. The point is not to take a strict approach toward festivals, but rather to take simple steps, to make them more enjoyable. After all, we don’t want half our minds worrying over expenses, while we’re spending time with our families, do we?
With that, I take leave, but not before conveying the season’s greetings from FundsIndia. May the festive season bring you happiness and prosperity.
Mr. Girirajan Murugan is the CEO of FundsIndia
