How to take care of your financial health in the festive season

With the onset of Navaratri around the end of September, the festive season has formally begun in our country. This is a time of celebration with family, relatives and friends. This is also the shopping season for many households in India. Big ticket purchases like new vehicles, real estate etc. are usually made in this auspicious period. While this is a time for indulgence for many people, it is also important that we do not go overboard.

In this blog post, we will discuss why you should remain focused on your financial health even during festivities.

Why is discipline important?

The time from Navaratri to Diwali is a time of celebration. For many people the Diwali season and the wedding season that follows, is a time of indulgence. Many people gain weight during this season and find it difficult to lose it later. You must exercise restraint and not give in to your cravings for the sake of your own health. Shopping is also an indulgence for many in the Diwali season. You may want to buy the most expensive apparel, jewellery, appliances etc, spending far more than what you had planned. Splurging on luxury items can provide short term gratification, but the habit of overspending will harm your financial interest in the long term. Financial discipline is just as important as the discipline in your health regime.

How to remain financially disciplined?

Financial discipline is of utmost importance if you want to achieve your different life-stage goals. In order to maintain financial discipline you should always have an expense budget. Just like many of you have a monthly expense budget, you should also have a Diwali shopping budget. When you are making an expense budget, it is wise to remember Warren Buffet’s quote, “Do not save what is left after spending, but spend what is left after saving.” If you want to spend more in Diwali, you should make sure that you save more in the following months. Most importantly, an expense budget is of no use unless you stick to it.

If you are planning a big ticket purchase e.g. car, do your research before-hand e.g. price of the car model, total cost including registration, road tax, insurance etc. Avoid succumbing to last minute temptations of buying a higher end model after seeing one in the showroom. Temptation is the antithesis of discipline. Temptation is only fleeting, but it can cause long term harm to you. Discipline is not very difficult, you simply need to be in control of your emotions and resist sudden urges.

Related read: What is financial independence and how SIPs can help

Managing expenses is not enough; you need to invest

Many people, who have successfully managed to get themselves in better physical fitness, will tell you that cutting down on food or diet control are not enough to get into better shape. You also need to exercise if you want to reduce your weight or improve your fitness. Exercise is an investment that you make in your health. Similarly savings is not enough for your financial health; you need to invest in order to achieve your financial goals and aspirations.

You may like to read: what is goal based financial planning?

What is investment? Investment is putting your savings to productive use. The productive use of your savings is growth and wealth creation in the long term. How will you create wealth from your savings? When you invest your savings, you can get profits or income from your investments. Profits re-invested can get your higher profits – this is known as compounding. Through the power of compounding you can create wealth over long investment horizons. Real wealth creation can be achieved if your wealth grows at a rate faster than the inflation rate. That is why it is important to invest in assets which generate inflation adjusted returns to create wealth.

Suggested reading: How asset allocation help diversify your investments?

Disciplined investing

We have discussed the importance of financial discipline in a previous section. It is also important to be disciplined in your investing. Mutual fund Systematic Investment Plan (SIP) is an ideal way for you to invest in a disciplined way. You should continue your SIPs and ensure that your SIP transactions do not fail due to insufficient balance. If you have not yet started investing through SIP or are not investing enough, this is a good time to start a SIP or increase your SIPs.

Would you like to read how to maximize your SIP returns in volatile markets?

Dhanteras is a festival, which comes just before Diwali. Though many Indian households associate Dhanteras with buying jewellery, as per our ancient traditions Dhanteras is associated with both health and wealth. In earlier times, wealth was associated with gold but in modern times, wealth is not just limited to gold, even though gold continues to be an important asset class for investments. Apart from gold, equity is another important asset class for capital appreciation and wealth creation. Historical data has shown conclusively that equity gives higher returns over long investment horizons. You can use the occasion of Dhanteras and Diwali to invest in equity and gold through mutual funds.

Conclusion

You should remember that Diwali is not just a festive occasion; as per Indian tradition, Diwali also marks a new beginning. It was on Diwali that Lord Rama returned to His home in Ayodhya after 14 years of exile; so this was a new beginning.

If you do not have an investment plan, you should use this auspicious occasion to build one. Take into account your different financial goals – short term, medium term and long term, when you are building your financial or investment plan. You should always invest according to your financial goals and your risk appetite. You should consult with your mutual fund distributor or financial advisor if you need help in making investment decisions.

Issued as an investor education initiative by HSBC Mutual Fund.