7 tips to keep your festive season spend in check

Bright lights, cheerful faces and a general exuberance in the environment mark the beginning of the festive season in India. This much-anticipated time of the year puts everyone in a happy mood, making them more willing to indulge and splurge. From traditional purchases, like new clothes, consumer durables and jewelry, Indians are expanding their festive shopping lists to include aspirational and big-ticket transactions, such as fancy cars, lavish homes and exotic holidays. It would not be an exaggeration to call the festive season in India a ‘Great Shopping Festival’.

Brands capitalize on this festive spirit to offer tempting deals and discounts, making it more attractive for consumers to loosen their purse-strings. To give you a perspective, a study shows that last year Indians spent around $3.2 billion in online shopping during the month-long festive sales that ended in mid-October. No doubt, festive season turns out to the most expensive time of the year from many, derailing them from the path of prudence and wise financial choices. If you face similar conundrum every festive season, below are a few simple measures that you can take to enjoy the festivities this year without straining yourself financially:

1. Stick to the budget 

As the tendency to go overboard with spending is high during the festive season, it would be advisable to determine a budget to stay in check. Start by drawing up a list of expenses that you deem absolutely necessary. Be as precise as possible. For instance, if you are setting a budget aside for gifts, go a step further and set a budget for each person on your list. Next, decide the amount that can comfortably spend based on your monthly income and expenses. Post this exercise if you realize that all your expenses are not fitting in your budget, try prioritizing. Put necessities ahead of wants. Avoid spending on items which you can buy post the festive season as well. Try resisting the urge to use your credit cards for indulgence as high-interest on such transactions create a debt trap, causing much financial distress. 

2. Shop wisely

Special advertising and marketing campaigns during this season tempt the buyers to make impulse purchases. A shopping list, in order of priority, is a great way to avoid such temptations. Once the list is ready, scout for relevant deals and offers. Do not fall prey to the popular marketing gimmick which entails first inflating the price and then offering a ‘festive’ discount on the same. Do a thorough research and read between the lines to avoid such traps. Online shopping can be a viable option to avoid the rush. It saves you both time and money by allowing you to compare product features and price more conveniently. Opt for cashback deals wherever possible. If you have accumulated loyalty points on your membership cards, this would be the best time to redeem them.     

3. Build a ‘Festive Fund’ 

While waiting for the festive season to begin, how about setting aside a certain sum of money per month towards a special ‘Festive Fund’? Creating such a fund will ensure that you have enough resources to foot your festive season expenses without unnecessary stress. Add a 20% mark up to the expenses you incurred last year and divide this amount by 12 to arrive at the monthly figure that you must contribute towards this fund. You can also explore short-term debt funds as an investment options. The underlying securities in such funds mature in 12 months, giving you better returns. By sticking to this fund for financing your expenses, you can keep your unplanned expenses in check. 

4. Plan your big-ticket transactions 

If you have set your mind on booking that house or buying your dream car during the festive season, make sure to work towards these goals in a systematic manner. The approach to big-ticket transactions is not much different from your run-of-the-mill shopping. Just the way you compare discounts, deals and freebies before making a purchase, do a thorough market research of what is on offer before signing any deal. Read the fine prints and seek advice from experts if you feel the need. Similarly, while applying for a loan, gain as much clarity as you can on your requirement and application process. There are various measures you can undertake to minimize your loan payments, such as maintaining a healthy CIBIL score and negotiating with your bank for better rates. Most importantly, have a long-term approach instead of an impulsive one for these transactions. Saving and investing wisely towards such goals is important to realize them without excessive financial burden.   

5. All that glitters is not gold

Every year, the markets witness a surge in gold buying. This ‘shopping’ is termed as an ‘investment’ by many as they believe that the yellow metal is a hedge against future uncertainties. Be aware of the fact that gold offers no regular income other than value appreciation. Buying jewelry is advisable for consumption purposes but not for investment. If you are looking at this precious metal from an investment perspective then a smart alternative would be to buy gold ETFs which are traded on the exchange and offer returns as per the price of physical gold. It will also save you the cost of keeping your gold jewelry in safe custody. There are better growth options available for investment that you can consider. For instance, equity offers long-term returns of 15-16% CAGR over a 15-20 year time period, making it a great alternative, offering better returns than gold. 

6. Do save

Just because it’s the festive season does not mean that you should break away from good financial habits. Continue saving and investing towards your life goals. If you get any bonus during the festive season, ensure that you save and invest a chunk of it before spending on the festive cheer. This definitely does not mean that you deprive yourself of the festivities. Just be mindful of your finances to ensure that you do not jeopardize your other financial goals due to overindulgence in the festive season. 

7. Don’t stretch to impress 

The festive season in India has, over the years, transformed into a show-off season. Many families stretch their budgets under the pressure to show their friends and family that they are doing well. Around this time, people end up buying things that they do not need with the money they do not have. It is, therefore, highly important that you stay cautious and do not succumb to this tendency. Like Warren Buffet says, “Spend wisely. If you buy things you don't need, you will soon sell things you need”.    

As we approach the festive season, remember that festivals in India have spiritual roots rather than materialistic. Instead of making it the ‘Great Shopping Festival,’ spend quality time with your loved ones and hold on to the belief that good always triumphs over evil to live the true spirit of this season.  

Originally published in DNA Money, Nov'18.