Enjoy The Festivities, But Skip Taking Debt: Tips On Spending, Investing And Gold Loans

Queries

Manasvi Sharma, 25

I feel pressured to buy gifts for family and keep up with friends’ spending. How can I avoid impulse purchases and debt this festive season?

Festivals should create memories, not EMIs. The easiest way to avoid overspending is to decide on the total festive budget. Start with an amount you can spend from this month’s income and existing savings, without touching your emergency fund or carrying a credit card balance forward. Then divide it between gifts, family celebrations, travel and personal spending. Once one particular bucket is exhausted, stop.

For gifts, decide the amount per person in advance rather than shopping first and calculating later. Social spending needs firm boundaries. You do not have to match your higher-earning friends.

Credit cards are useful only when they are a payment instrument, not a borrowing instrument. If the full bill cannot be paid on the due date, the purchase is clearly unaffordable.

Most importantly, budget for your enjoyment too. Financial discipline does not mean saying no to everything that you may want; it just means that you should decide beforehand how much you spend. If you are able to do this, you will also be able to discover a side of your life which can resist societal pressures.

Aditi Singh, 26

I am concerned about my financial independence with rising living costs and long-term goals. How can I build wealth while managing expenses and avoiding debt?

First, build three foundations: health insurance, an emergency fund of around six months’ expenses and freedom from expensive debt. Thereafter, start investing regularly for long-term goals through diversified equity mutual funds, while keeping money required within five years away from equity.

Do not try to fund a house, early retirement, travel and every other aspiration simultaneously. Put numbers and timelines against the important goals and prioritise them.

One habit matters enormously: whenever your income rises, increase your investments before your lifestyle. This prevents expenses from catching up with earnings. But financial independence should not become another form of anxiety. Build wealth steadily, invest in your career and enjoy your present responsibly.

Col. Sanjeev Govila (retd), CEO, Hum Fauji Initiatives

Ananya Rathi, 25

I have not filed my income tax return (ITR). I need a loan of around ₹6 lakh for home improvement. My mother has gold assets. Is gold loan a suitable option? Are there any risks I should consider?

A gold loan could be a practical option, if you have a limited credit history and income proofs. Gold loans are secured against pledged gold, although lenders may still assess repayment capacity. Also, gold loans are more affordable compared to personal loans.

The amount sanctioned depends on the gold’s purity, net weight and gold prices. Assuming the current valuation of gold around Rs 10,000 per gram and a loan-to-value (LTV) ratio of 75 per cent, you would need approximately 80 grams of eligible gold to borrow Rs 6 lakh.

Actual requirements may vary.

Interest rates, processing fees, tenure and repayment options differ across banks. Compare the annualised borrowing cost and understand if interest is payable monthly or at maturity. Check the consequences of delayed repayment, as the lender can auction pledged gold after following the process.

Since the jewellery belongs to your mother, obtain her informed consent and confirm ownership requirements. Do not forget to get a receipt listing each ornament, its net gold weight, purity and identifying features, while handing over the gold to the lender.

Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution