The festival of Dussehra symbolises the victory of good over evil. As mentioned in the Ramayana, Lord Rama, the king known for his judicious approach, defeated the ten-headed Ravana - who represented evil choices. In today's modern world, we are surrounded by many evils: Not demons you can see and slay, but unchecked habits leading us towards decisions that bring down the quality of our lives.
There are some ‘financial demons’ all around us, be it the cashless economy, which is both a boon and bane, or easy EMIs, which, if left unchecked, can derail your finances. Here’s a guide to identify and overcome some key financial evils many of us face today:
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1. Conquering The Evil Of Debt
Debt is like a multi-headed Ravana - once it grows, it’s hard to keep it under control. Be it credit card bills, personal loans, or unnecessary EMIs, we are at evermore risk of falling into the temptation of ‘easy money’.
How to defeat it? Start with a plan to handle your debts systematically. You can prioritise high-interest debts such as credit cards and payday loans and pay these off first. You can build a momentum using these two methods:
a) Snowball method: Paying off the smallest debt first
b) Avalanche method: Start with the highest interest rate debt and eventually move on to other debts.
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Moreover, the best strategy can be to avoid taking on new debts unless necessary and resist the lure of ‘festive loans’ that often seem enticing during the festive season.
Says S Ravi, former chairman, BSE India, and founder at Ravi Rajan & Co., a CA firm, "Overspending leads to lot of debt. Lifestyle management based on own income and saving is the mantra, extraordinary expenses or unwanted expenses should be avoided through a structured mechanism of controlling expenses."
2. Slay The Demon Of Impulsive Spending
The festive season brings with it the lure of offers, discounts, and sales. These can often lead you into the trap of buying things you don’t need. It is easy to get swayed by the mindset of “self-care splurge” since it’s a special time of the year. However, this kind of impulsive spending can drain your savings and put you in financial trouble post-festival.
“Based on income of the person, savings, one must keep the budgets in mind and prepare for the spends. Spending should be strictly based on savings and income. One must also not borrow to spend for festivities," Ravi says.
How to defeat this evil? First and foremost, make a ‘shopping list’. Impulsive spending often happens when you don’t know what you want. Therefore, before stepping into a sale or even browning online offers make a list of things you need to buy this festive season - both the necessary and luxury items. Better yet, allocate a separate festival budget for your shopping, and once it is spent - it’s spent. Practicing this discipline will ensure that you enjoy the festive season without regrets in the aftermath.
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3. Defeat The Habit Of Procrastinating Investments
Most of us know the importance of investing, but not everybody does the deed just by having this knowledge. In the age of social media, you must have come around plenty of reels boasting about the magic of compounding and how this simple phenomenon can increase your wealth. However, one should know that the real benefit of compounding is in ‘staying invested’.
Delaying investments, even by a few years, can significantly reduce the growth of your wealth due to loss of compounding interest.
What should you do? Understand your finances and get into the mindset of ‘delayed gratification’. Meaning if you have a surplus of money left after spending on all your needs, allocate a portion for investments. You can start a SIP for as low as Rs 500 in a fund you believe fits your goal. “The power of 10 to 12 per cent of return compounded over 15-16 years is highly underestimated,” Swarup Anand Mohanty, vice chairman and CEO of Mirae Asset Investment Managers (India) said recently during the 40 After 40 Retirement Expo organised by Outlook Money.
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He further emphasised that it is wise to stay invested and give time to your investments rather than timing the market.
4. Burning The Ravana Of Unnecessary Luxuries
The consumer culture today would easily justify luxury purchases - whether it is about upgrading devices every year (getting a hold of that new iPhone just launched!), dining out frequently, or indulging in branded fashion. Though such expenses may seem insignificant when looked at individually, collectively they can drain a large portion of your income.
How To Defeat It? Luxury spends are totally up to you. It’s you who will decide where to cut and where to spend. Best would be to identify areas where you can cut back on luxury and channel that money into long-term savings. For example, if you dine out four times a week, try reducing it to once or twice and save the difference. Use the money to invest in things that matter, such as an emergency fund, your child’s education, or better fill in your retirement account.
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5. Killing The Laxity Of Financial Planning
The young will resonate with this the most. Strategic planning of finances is a concept that gets entrenched in life not until later ages, say by 30 or 35. Financial planning is something one can start as soon as they start earning. The absence of financial planning leaves you vulnerable to make hasty decisions, especially during the festive times when expenses tend to soar.
How to defeat this? Know that it is never too early (or late) to start getting a hold of your finances. Sit down and create a financial plan and take expert guidance if needed. Keep in mind the short-term and long-term goals which may involve saving for a trip you’ve been planning or buying a house, respectively. A clear path sets deadlines, which ultimately helps you stay focused and manage your income more effectively.
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6. Avoid Temptation of Festive Loans
Around these months of Dussehra and Diwali, banks, NBFCs, and other financial institutions promote festive loans with attractive offers and easy EMIs. While no doubt this presents a great deal to tick off your big-ticket purchases such as a new vehicle or appliances, taking on additional loans (if you already have one) can strain your finances for years to come.
How to defeat this evil? Before you take up any loan this festive season, ask yourself if the purchase is necessary. If it’s something you can live without or save up for, consider doing that instead. However, do not use your emergency fins or planned savings for such big purchases until absolutely necessary.
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7. Control Taking The Risk Of High-Risk Investments
While not investing at all is bad for your wealth growth, taking up high-risk investments that you can’t afford will be an absolute blunder for your finances. Many individuals are drawn to the stock market, cryptocurrency, futures, and options (F&O), or other volatile assets with the hope of making quick profits. While in some cases these can yield high returns, they can also lead to significant losses if not managed wisely.
How to defeat this evil? You can start by keeping your greed in check. The allure of quick profit is not worth the risk if the chances of loss weigh way more than gains. This stands true for stock market trading such as F&O whereas per Sebi data 9 out of 10 investors have reported losses. Diversify your investment portfolio to reduce risk but do this wisely. Over-diversification can off-balance your cumulative profits. Also remember, slow and steady wins the race when it comes to wealth accumulation. Do not try to time the market, rather give it time and see your profits grow.
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8. Erase The Darkness Of Financial Illiteracy
Financial illiteracy is one of the biggest obstacles to building wealth. Despite easy means of knowledge today still, many people do not know the financial concepts of ‘compounding’, inflation, tax planning, etc. If you know about these, do you know how they affect your finances?
Says Rvi, "Financial literacy is the one that determines whether any person has prudent investments with reasonable returns and lesser risk . It can easily be accomplished as there are many programs by investor education, fund, institution, exchanges, and various bodies associated with the financial system. Structured financial literacy can surely help in evaluating the returns and risks."
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How to defeat this evil? Make a conscious effort to educate yourself about personal finances. Attend webinars, and follow sources like Outlook Money that regularly report on these matters to stay updated. But ensure to not get misguided by advice circulating on social media without first varying them from credible sources.
9. Overcome The Ignorance Of Insufficient Insurance
There are many individuals who neglect the need to get proper insurance coverage despite having many dependants on them. Insurance can be vital for some people and a waste for others. Whether it’s health insurance, life insurance, or property insurance - ignoring any significant protection against any unforeseen circumstances of life can end up heavy on your finances.
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How to defeat this evil? With the knowledge of your responsibilities and keeping uncertainties in mind - you can identify the kinds of insurance you need in life. Use this festive season to review your insurance portfolio and ensure that you have adequate coverage for health, life, property, cyber insurance, etc.
10. Prepare For Future! Save Smart To Gain The Ultimate Victory
All things considered, if you make it a reminder to win over financial insecurity by securing your future, you stand to achieve the ultimate victory against most financial evils. Long-term goals like buying a house, a child’s education, marriage, retirement, etc. require you to save consistently.
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How to gain this victory? Just like how our ancestors had ‘gullaks’ for regular savings you can set up automatic transfers from your bank account into a dedicated savings or investment account. Starting a SIP can also count as smart savings which will build you a substantial corpus in the long run. This ensures that a portion of your income is consistently saved for the future, allowing your wealth to grow over time.
This Dussehra, you can do more than just watch the effigy of Ravana burn but actually defeat the financial evils that hold you back in life. Just as lord Rama meticulously planned his victory against Ravana you too can plan your way to good finances. By being mindful of your savings, avoiding impulsive decisions, and making disciplined investments, you can achieve financial security and peace of mind.