Probably the best part of the year is on us; festive season; Navratri, Dussehra will be closely followed by Deepavali, Christmas and New Year. It is arguably the time of year when people are happiest and spend, spend, spend.
Herein lies the trick; experts agree that we Indians can go overboard and spend beyond what financial prudence or even needs dictate. Fortunately, experts offer us a guide to ensure that our finances do not take a hit during this period.
“Like people in many other cultures, Indians tend to increase their spending during the festive season and this can sometimes lead to overspending,” says Col Rakesh Goyal (Retd), Certified Financial Planner, Founder and CEO. Let’s Invest Wisely.
First, let’s take a look at the offers (read: discounts) available. While we do indeed have offers, there is a double-edged sword here.
Take, for example, an online major’s shopping festival right now. “Like most things in life, you can make it a blessing or a bane depending on how you approach it,” says Chief Operating Officer Mayank Bhatnagar. FinEdge.
We show the difference. As a smart shopper, you can still use this opportunity to buy the gadget, car, or clothes you need for 20-30% less.
The problem starts when you start buying things you don’t need, even with borrowed money.
“Set yourself clear spending limits and do not let your card expenses exceed what you can comfortably pay next month. Avoid racking up BNPL (buy now, pay later) loans or buying things you don’t really need. Use these offers wisely,” advises Bhatnagar.
“Look at the descriptions,” says Goyal. Many offers come with terms and conditions, including minimum purchase requirements, special payment methods, and expiration dates. Always read the detailed text to understand the details of the offer.
If you are considering getting a holiday loan or credit card offer, pay attention to interest rates and repayment terms. Sometimes interest costs can offset initial savings.
Be careful with gift cards and coupons. Sometimes these may have expiration dates or usage restrictions that may limit their value.
Many times your office or employer can give you a bonus. This windfall could be another way to Stay on Top with your spending.
Experts give their opinions on using it windfallOf course, this is a situation that varies from person to person.
“You may choose to use the bonus to take out a high-interest loan, which is a prudent option,” advises Bhatnagar.
Of course, there are other options, such as using all of the money to fund a trip during the festive season.
Still another person may choose to increase their emergency coverage if they consider changing their job/industry in the future.
“As it is a personal decision as well as a financial one, an investment professional can help make this decision. As always, a balanced approach between lifestyle spending and saving/investing is recommended,” say experts.
And yes, let’s not forget those big bogey taxes.
“Any gift given to an employee on an occasion like Diwali or marriage is taxable to the employee,” says Founder and CEO Archit Gupta. Clear. Similar to a performance bonus that is fully taxable, gifts received as rewards or on special occasions are also taxable.
exemption up to ₹You are allowed up to $5,000 in exchange for gifts made by the employer in cash or in-kind. These can be taken by the employee himself or a family member.
There is also: taxation Consideration if gifts come from other sources (e.g. family and friends).
up to cash gifts ₹50,000 or less is not taxable. “Don’t forget to collect all your cash gifts for the year. If they exceed ₹50,000 of the total amount is taxable,” says Gupta.
This will be added under ‘Income from Other Sources’ and will be taxed according to your tax bracket unless you decide to return the money in the same tax year.
exceeding material gifts ₹The tax with a value of 50,000 is also taxed in the same way.
Gifts received from relatives are tax-free. What’s more, there’s no limit to how much you can get! Relatives are defined in the law. Your spouse, your parents, your brother or sister (and their spouses), your spouse’s brother or sister (and their spouses), the brother or sister of any of your parents, any of your or your spouse’s descendants or descendants; is defined relatively.
All Gifts received during marriage are tax-free but those received on Diwali or on your birthday are taxable. These rules also apply when the giver or recipient is non-resident.
“If you are planning to gift money, gold or any other gift to your children or parents on Diwali, there may not be any tax implication; Note that although receiving a gift of a fixed deposit is not taxable for your children, the interest income earned on such fixed deposits will be combined with your own income,” says Gupta.
Or, if you gifted a home or an asset to your spouse, income from such a gift may be taxable on your returns.
Experts give us some guidelines on what to do with the financial reward you may encounter this festive season.
“Adopt the 50-30-20 Rule,” says CEO Kartik Narayan TeamLease Services. So, allocate 50% for essentials, 30% for holiday entertainment, and 20% for savings.
Look at debt reduction, prioritize paying off outstanding debts. Using your bonus to reduce liabilities not only provides peace of mind, but also saves on future interest payments.
Invest Wisely. Instead of temporary pleasures, direct some funds towards personal growth or meaningful experiences. This can yield long-term personal and professional gains.
Emergency Preparedness. Create or support an emergency fund. This financial cushion provides stability by protecting against unforeseen expenses.
Another minefield that consumers need to be very careful about is credit cards. Credit card companies often offer lower-interest loans or even interest-free (short-term loans) during the festive season. “It’s really best to avoid these,” Bhatnagar emphasizes.
Credit card debt is the most dangerous type, and borrowers are often forced to pay off debt beyond their comfortable repayment capacity. This can cause a lot of stress and can also lower your credit score if you’re not careful.
And yes, your credit rating agency doesn’t take a vacation during the holiday season!
An EMI default is an EMI default regardless of the time of year! This is another reason to use credit responsibly this time of year.
“After all, the festive season should be a time of happiness and togetherness, not financial stress. By being mindful of your expenses and making responsible financial decisions, you can fully enjoy the celebrations without risking your long-term financial well-being,” Goyal concludes.
How do Indians spend and overspend during the festive season?
Giving a gift: Giving gifts is a common tradition during festivals like Diwali, Christmas and Eid. People often feel the need to buy gifts for family and friends, and this can lead to overspending, especially when they buy expensive items or feel pressured to give more than they can afford.
New clothes and accessories: It is a tradition for many Indians to buy new clothes and accessories for themselves and their family members during festivals. These purchases can be quite significant and do not always fit into one’s budget.
Home decoration and renovation: Many people undertake home renovation or redecorating projects ahead of the festive season to ensure their homes look beautiful and welcoming for guests. These projects can be expensive and lead to excessive expenses.
Banquet and meal: Preparing elaborate holiday meals and hosting gatherings can also be costly. People can strain their budgets by buying expensive ingredients and organizing extravagant banquets.
Trip: Festive seasons often include traveling to visit family and friends. Travel expenses, including transportation, lodging, and eating out, can contribute to overspending.
Consumer electronics and devices: Some people take advantage of festival sales to purchase consumer electronics and appliances. Although these sales offer good deals, unplanned purchases can lead to excessive spending.
Gem: Festivals like Diwali are considered auspicious times to buy gold and jewellery. Many people invest in these items during the festive season and this can be a significant expense.
Getting credit: In some cases, people can apply for a loan or credit card to cover their festive season expenses. This can lead to long-term financial difficulties if not managed properly, said Colonel Rakesh Goyal.
Financial tips to navigate the festive season
Budget wisely: Create a clear and realistic budget for your festive season expenses. This should include any expenses you have planned, such as gifts, decorations, travel and banquets. Stick to your budget to avoid overspending.
Avoid debt: While it’s great to take advantage of offers and discounts, be careful about using a credit card or loan to fund your festive season expenses. Accumulating debt can lead to financial stress in the future.
Early plan: Plan ahead for the festive season. Start saving money throughout the year so you can enjoy the celebrations without straining your finances.
Focus on value, not just price: When purchasing, consider the value of what you are purchasing. Sometimes spending a little more on quality products can be a better long-term investment than going for the cheapest option.
Prioritize experiences: Consider prioritizing experiences and quality time with loved ones over material possessions. Meaningful interactions and memories can be more valuable than expensive gifts.
Review your financial goals: The festive season is a good time to reconsider your financial goals and ensure your spending aligns with your priorities. Don’t lose sight of your long-term financial well-being.
Avoid impulsive purchases: Avoid making impulsive purchases. Take time to research and compare options before making a decision.
Give thoughtfully: When giving gifts, focus on thoughtful and meaningful gestures. The value of a gift often lies not in the price tag but in the emotion behind it.
Practice gratitude: Remember the essence of the festival: gratitude, sharing and celebrating with loved ones. These aspects can bring more happiness than extravagant spending – Colonel Rakesh Goyal.
Manik Kumar Malakar is a personal finance writer.
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