Summary of this article
Diwali Budgeting: The festival of Diwali is considered an auspicious time for making major purchases. However not budgeting efficiently can lead to huge expenses.
The festival of Diwali is fast approaching. Traditionally, the festive season is linked with spending. Households often postpone major purchases till the festive season to make the most of the auspiciousness of the occasion. However, a festive spending spree has the potential to cause long-term financial stress especially if individuals do not commit to a budget and do their festive spending accordingly.
Thus, by embracing smart planning and mindful spending, individuals can ensure that the festival of lights doesn't lead to a season of debt. The five-day festival kicked off on October 18, with the festival of Dhanteras and will conclude with the celebration of Bhai Dooj on October 23. Here's a look at some ways individuals can plan smartly for family and friends:
Differentiate Between Needs and Wants
The first step for properly budgeting your purchases during the festive season is to list all potential expenses, ranging from new clothes to major purchases such as buying consumer durables. Individuals should assign a realistic spending limit in line with their income and overall financial goals. Individuals should also differentiate between their needs and their wants and not make purchases simply out of peer pressure.
Manasvi Garg, chartered financial analyst (CFA) and founder of Moneyvesta, a wealth management company, told Outlook Money that individuals should consider setting a budget and only then take up a loan to fund their big-ticket festive spends, such as consumer durables like washing machines, TVs or refrigerators.
"Ahead of Diwali, set a clear budget, and take only the loan you absolutely need. If you opt for a loan, scrutinise the fine print (interest rates, tenure, fees) and keep EMIs well within your repayment capacity," Garg said.
Avoid The Last Minute Rush
Once individuals have a spending limit and a list of the items they wish to purchase, they should try to avoid the last-minute rush and begin their shopping as soon as the sale offers start. Starting the buying process early provides more time to compare rates and discounts across multiple websites and physical stores.
Cash Is King
Retail outlets try to lure buyers with lucrative discounts and offers. Often, brands also advertise EMI schemes and loans. While there may be certain use cases wherein availing a loan gives you a cheaper deal, it is always ideal to pay money up front. By paying money up front, you can avoid the additional cost you may incur in the form of interest. Garg advised buyers not to fall for such schemes and only use them if they actually help the cash flow.
"If you can afford to pay cash without draining your emergency fund, that is often cheaper. If you can comfortably pay upfront, that's almost always the smarter option. Only use no-cost EMI when it truly helps cash flow, not just because it seems free," Garg said.
Embrace the Power of DIY
Prior to the days of e-commerce and quick commerce, the traditional way of celebrating Diwali involved a fair deal of Do-It-Yourself projects. Instead of opting for single-use home decor, individuals can go back to tradition and opt for DIY decorations such as hand-painted diyas, rangolis and other decor. By opting for these decorations, individuals can save additional money and tune their festive budget accordingly.
Joy of Community
Instead of hosting and organising a large party, which may lead to huge expenses this festive season, individuals can opt for more community-based celebrations. One popular way of having a community-based celebration, which does not burden a single person with all the expenses, is to opt for a potluck event. Doing so not only eases the financial burden but also allows everyone to share their culinary skills and enjoy a diverse spread.
Garg said that festive celebrations should not become a long-term financial burden. He added that by budgeting judiciously, one can participate in the festive cheer without regrets or debt.
"Festive celebrations should not turn into a long‐term financial burden. The golden rule remains: "don't over-leverage beyond what you can repay". By budgeting judiciously and staying aware of hidden costs, you can enjoy Diwali's cheer without regret or debt stress," Garg said.
