How to keep expenses in check during this festive season

It is that time of the year when preparations in households start in full swing for the festive season. Celebrations are expected to be on grand scales with much pomp and show everywhere this time what with the fear of coronavirus having become a thing of the past - the din and bustle in marketplaces, frenzied sales on ecommerce portals are indicative of the prevailing sentiment. In fact, according to data released by LocalCircles, a citizen and community engagement platform, spending in the festival season in 2022 could hit $32 billion as Indian households prepare for a restriction free Diwali. Furthermore, one in three Indian households plan to spend an estimated ₹10,000 this festive season, with footfalls in stores and markets set to jump by 20%.

Starting with Raksha Bandhan, the festive season in India starts in August and goes on till late October or early November with the fervor peaking around Diwali. Festival celebrations in India are a resplendent reflection of the country’s rich culture and traditions. However, festival celebrations can be an expensive affair, especially considering there are a string of festivals that are observed within short intervals of each other. Here are few ways you can prevent festival expenses from creating a dent in your finances:

Budget is sacrosanct

The festive season is a time when we let go of our worries and focus on making merry and spending quality time with our loved ones. Owing to the prevailing mood, it is easy to get carried away and go overboard with your festival expenses. Drawing a festival budget can help you keep your expenses within limits. You should lay down a clear cut budget in a way so that your existing EMI payments and investment routines are not affected by your festival plans. Care should be taken to minimize the need to have to resort to short term credit for your celebrations. Preeti Zende, a SEBI-registered investment advisor and the founder of Apna Dhan Financial Services says, “Always determine your budget before any purchase for this festive season. Be mindful of your purchases so that you don’t end up spending unnecessarily which can hamper your savings and investments.”

Borrow carefully

Buying consumer durables, gold, vehicles prior to Diwali is a customary tradition in many communities in India. Owing to the peak demand for these objects during this season, banks and financial institutions also roll out attractive offers for loans. Zero processing charges and discount on interest rates attract many people to take loans for these purchases. However, any loan should be taken after due consideration of your existing liabilities and obligations, especially if you have just recovered from a rough financial episode. Moreover, a loan taken for luxury purchases is not at all recommended and can put you in a debt overhang. Zende says, “Do not get lured by easy loan options that may be available at this time. A debt is a debt and you need to pay it back. There is no point observing a custom just for the sake of it while setting yourself up for financial trouble.”

Embracing the great Indian ‘jugaad’

Festive gifting and shopping can seem overwhelming especially if you have a large circle of relatives and friends. A smart way to navigate the labyrinth of purchases is to use a mix of DIY (do-it-yourself) and personalized gifts. For example, you can gift a jacket made out of an old saree to a cousin who has a penchant for all things fashionable or get a patchwork quilt or duvet made from old clothes for your aunt. Also, it is important to ace the art of scouting for deals and discount coupons if you are serious about minimizing leakages during the festive season. Rather than waiting to buy gifts when the festivals are around the corner, you can start a few months in advance by making a list of the gifts that you have and purchasing them through ecommerce portals whenever there is a sale. This way your expenses can be spread over a period of months and you can fulfill your gifting goals without having to feel pressed for money or by swiping your credit card.

Action points

• If you have missed the bus this time, you can prepare for the next upcoming festive season by starting a festival kitty. A few months before the onset of the festive season you can start setting aside extra cash in a separate bank account. You can also keep money in a linked FD or arbitrage funds or use liquid funds to set up a festival kitty.
• A great way to cut costs during festivals is to host parties or potlucks on groups. It is way gentler on the pocket than eating out at restaurants and you can use this opportunity to bond with your friends and show off your culinary skills as well.

This article is part of the HT Friday Finance series published in association with Aditya Birla Sun Life Mutual Fund.