The festive season has already begun, and soon we’ll celebrate Dhanteras and Diwali which have great financial importance in terms of expenses and investments. A little bit of carelessness at this stage can have a negative impact on your short and long-term financial goals. Read on as we discuss 5 crucial mistakes that you should avoid to ensure you make the most of the festivities without harming your financial health.
Spending More Than Your Budget
It’s easy to get carried away in the festive mood and spend more money than what one would have planned for in the budget. Markets usually get flooded with celebratory offers and people think that if they don’t purchase certain things immediately, they won’t get a similar deal in the future! With such a mindset, they often ignore their budget for festival-linked expenses (if they have made one, i.e.) and start spending money from their core savings and emergency funds. However, after the festive season, they realise their mistake. Worse, they are left defenceless if they face any financial emergency in the absence of an adequate contingency fund. As such, always stick to your budget and avoid leveraging more than your financial capacity to satisfy your spending urge. Overspending can spoil your financial plans, so a little restraint can save you from a lot of financial strain in the future.
Exhausting Festive Bonus
Many companies declare bonuses for their employees during Dussehra and Diwali. However, some people think getting the festive bonus is like winning a lottery, and they end up spending it all on unplanned and discretionary expenses. In reality, a bonus is nothing but their hard-earned money which they receive as an acknowledgement of their hard work.
As such, bonus money should be used wisely. You’ll be well-advised to use it intelligently to meet important financial requirements first like prepaying a home loan, clearing snowballing credit card or personal loan dues and even for home renovation or to fund an upskilling course. In the absence of any urgent financial requirement, they should ideally invest a major portion of it to grow their wealth. The remaining can be used for festival-related expenses.
Making Hasty Investment Decisions
Dhanteras and Diwali are believed to be highly auspicious for investing money. Mutual fund companies, stockbrokers, insurance companies, realty developers, etc. come up with attractive offers to entice investors. Some people look at the attractive offers and invest their money without giving it a second thought. Such unplanned investments, however, don’t help in achieving their financial goals.
While investing during the festive period, match the features of the investment product with your financial goal’s requirement. Do check aspects like risk, return, liquidity, tax efficiency, cost of investment, and then make an informed investment decision.
Prioritising Festive Spending Over Timely Clearing Of Credit Card Dues
During the festive period, some people don’t pay their credit card outstanding; they rather prefer to spend their money on festive shopping. As a result, their credit card dues get rolled over to the next billing cycle and they incur interest charges in the process which could’ve been easily avoided. This, in turn, can lead to an accumulation of snowballing debt which might become difficult to clear later.
Rolling over card dues will also block credit limit to the extent of the outstanding amount and the credit cardholder will no longer enjoy the usual 50-days interest-free period till all dues are paid. Needless to say, missing credit card payment deadlines will also impact the card user’s credit score apart from attracting late payment fees. So, always make it a point to timely clear your credit card dues in full to be left with more room to accommodate your festive expenses, avail interest-free periods and steer clear from falling into a debt trap.
Buying Gold And Silver On The Festive Day On High Premium
Many people in our country buy gold and silver during Dhanteras due to traditional reasons. However, buying them during the festive period at a high premium may be counterproductive for your finances. As such, you should rather accumulate gold in small quantities throughout the year to minimise the impact of seasonal spikes in rates. You can also limit your Dhanteras buys to symbolic purchases, keep aside the money and buy the gold later when prices fall.
You can also choose to invest in Reserve Bank of India’s Sovereign Gold Bonds (SGB) and stay away from concerns over purity, storage and even paying GST. SGBs garner guaranteed interest income of 2.5% p.a. compounded semi-annually and their returns are completely tax-free upon the maturity of 8 years. What’s best is the next tranche of SGBs (2019-20 Series VI) can be subscribed between October 21 and 25, and the date of bond issuance would be October 30.
Hope these tips will help you fortify your finances this festive season. Wish you and your family a very happy and prosperous Dhanteras and Diwali!
The author is CEO, BankBazaar.com
BankBazaar.com is India’s leading online marketplace for loans and credit cards.