Plan your finances in advance for the upcoming festive season!
Holi is around the corner and many of us have plans of organizing intimate celebrations with friends and family; gifting and indulging in other ancillary expenses around the festive season.
With numerous expenses planned around festivals and wedding season in India, it is important for us to plan our finances around it.
“There are some undeniable perks of living in a joint family but one pain point that I have experienced and which is rarely talked about is the amount of money that gets spent on festivals or any occasion. I used to live with my husband in Mumbai but we moved back to our home town last year and we currently live with his family,” narrates Natasha Sinha (name changed).
India is called the land of festivals and rightly so. Since time immemorial festival celebrations in India have been an integral part of the country’s social and cultural fabric. Also, given the high level of social cohesion that continues to be a defining characteristic of India societies, the gusto seen during festivals has also coloured the way we observe other occasions such as birthdays, anniversaries, career milestones and of course weddings.
“Even today most Indian families, especially the close-knit ones do not wait for big occasions to celebrate. There is no denying the fact that such days are worth looking forward to as they break the monotony of the daily grind and more importantly, they remind us of the importance of living our lives beyond the world of screens. But as they say, everything comes at a price and I am realizing now that buying gifts and favours every now and then or hosting get-togethers – even small ones - is an expensive affair,” narrates Sinha.
Considering that many Indians have their calendars peppered with festivals, weddings and celebratory events all through the year, financial planning around such events isn’t something that is contemplated on. However, if you have to frequently shell out a significant amount of money on these occasions, it makes sense to dedicate a separate chapter in your money management arena on building a fund for these occasions so that it doesn’t have an impact on other areas of your finances.
There’s a lot in the details
Parvati Iyer, chief investment officer at Femwealth.com, an online investment management platform says, “As festivals approach we usually build up a long shopping list for celebrations. The temptation of good offers, attractive discounts may be difficult to resist. Whether using credit cards or opting for loans with irresistible EMIs, there is a high chance we could end up spending more than what we had planned. It helps to have a separate financial method in place for such purchases so that our regular monthly budget is never in jeopardy. Putting a rolling plan in place will ensure that there is less strain on our finances and can make festivities more enjoyable.”
Besides having a distinct financial strategy for these occasions, being smart with your festival and celebration expenses can help you save a lot of money. For instance, instead of buying gifts as every occasion warrants, you can buy generic gift items in bulk that you can put to use on birthdays, anniversaries and such events. Ecommerce seasonal sales can be a great time to restock your gifting inventory so that you can avail great deals. You will spend less than what you would spend if you keep buy gifts as and when the occasion comes.
Sinha who has learnt a couple of hacks to reduce her monetary outflow for these occasions narrates another example, “Celebrations mean dressing up and dressing up means a financial dent. I realised I couldn’t be buying a new outfit for every wedding or festival I would be attending. That taught me to shop in a way so that I could mix and match my clothes and wear them and it also taught me that good thrift stores could be your best bet to save money on outfits that you would not wear more than a few times.”
Laying a roadmap
Iyer says that the the first step is to create a simple festivities goal for the year. “The expenses incurred last year could be a starting point to tell us how much money to budget for. Include all kinds of expenses from buying clothes to gifts for near and dear ones, buying gold etc. Give enough lead time to the shopping so that you can compare prices and get good offers. This takes care of getting the biggest bang for the buck.”
Once you know the expected events that you would have to participate in, you can start accumulating at the beginning of the year itself. The next step would be to put away funds consistently in a liquid fund or an ultra short term debt fund, Iyer advises. “In addition whenever you come across some money, just add it to this fund so that you get better than FD returns constantly. A lot of us have small amounts of money lying around in various accounts or in the odd goalless investment. Consolidate them and add them to this fund. Whenever these expenses come up they can be withdrawn from the fund. If you feel that you indeed need to resort to a loan or debt, then put a repayment plan in place and have a separate strategy for it,” she says.
Deepak Chhabria CEO of Axiom Financial Services advises that investments in gold mutual funds can be beneficial because gold items constitute an integral part of celebrations in India. “You can invest small amounts in gold mutual funds and they are tax-efficient as well. Liquidity without any loss of value due to wastage as is the case with jewellery, is an added advantage.”
• While festivals are the time when it’s okay to indulge, but going overboard should never become a habit. Keeping a tab on your expenses on these occasions should not be put on the backburner.
• For major celebrations, make a list of expenses and include even the smallest ones. You will be surprised to see that there are a lot of purchases that can easily be eliminated.
• If you sense that an upcoming celebration which is a few months away will create a dent in your pocket, start immediately with an SIP plan in a short-term mutual fund scheme.
Disclaimer: This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.