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Diwali

Striking a Balance Between Spending and Saving During Diwali

Strategic Insights

— 2 min read

As the festival of lights, Diwali, approaches, many Indians face the dilemma of balancing their spending and saving goals. With festivities come increased expenses, and it's easy to get caught up in the moment and overspend. However, financial planners and seasoned savers recommend creating a "Festive Fund" or "Joy Fund" to ensure that spending remains planned and not impulsive. By setting boundaries and being mindful of one's spending, individuals can enjoy the festive spirit without financial regret.

Key Takeaways:

  • Creating a "Festive Fund" or "Joy Fund" can help individuals plan and budget for their festive expenses, preventing overspending and financial strain.
  • Setting boundaries, such as not buying on impulse or using credit cards for convenience, can help individuals maintain financial discipline during the festival season.
  • Planning purchases, monitoring genuine discounts, and continuing to invest regularly and systematically can help individuals make the most of the festival season without compromising their long-term financial goals.
  • A well-planned, high-value purchase can be a good strategy, especially during the festival season when prices are often at their lowest.
  • Rebalancing one's investment portfolio and reaffirming their goals during the festival season can help individuals stay on track with their long-term financial objectives.
  • Consolidating holdings, merging multiple mutual fund folios, and identifying overlapping investments can help individuals streamline their investment portfolios and improve their financial clarity.
  • Staying invested in equities for the long term but trimming exposure to overheated mid- and small-cap segments can help individuals maintain a balanced investment portfolio.
  • Limited exposure to gold and silver, about 5-10% in total, can be a diversification measure, not a substitute for equities.
  • Funds intended for expenses within three years should be kept in debt or near-cash instruments, while longer-term goals can remain invested in growth assets.

Statistics:

  • If an individual had spent Rs 3 lakh on home renovation in 2015 during Diwali, it would have made their home sparkle for a few more years, but the same amount invested in gold at the time would have grown to Rs 14.05 lakh today.
  • Spending Rs 12,000 on sweets every year on Diwali for 10 years would result in Rs 1.2 lakh being spent, while investing the same amount (Rs 1.2 lakh) through a monthly SIP of Rs 1,000 would have earned Rs 2.4 lakh.
  • Buying on EMIs, cashback offers, and reward points may influence spending behaviour during the festival season, leading to overspending on credit cards.
  • Planned spending, such as making pre-planned, high-value purchases, can be a good strategy, especially during the festival season when prices are often at their lowest.
  • Limited exposure to gold and silver, about 5-10% in total, can be a diversification measure, not a substitute for equities.

Sources:

  • "Numbers tell a sobering story" (Times of India)
  • "Financial planners and seasoned savers" (Money Mantra)
  • "Kashif Ansari, Professor at OP Jindal Global University and a credit card expert" (Times of India)
  • "Virial Bhatt, Founder, Money Mantra" (Times of India)
  • "Mrin Agarwal, Founder and CEO of Finsafe India, and Co-founder of Womantra" (Times of India)
  • "Ravi Kumar TV, Director, Gaining Ground Investment Services" (Times of India)
  • "Suresh Sadagopan, MD & Principal Officer, Ladder7 Wealth Planners" (Times of India)

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