Arrival of Ganapati marks the beginning of the festive season in India. It is followed by Navratri, Diwali and Christmas offering us many opportunities to splurge. Grand online sale, never before discounts, buy one get one free offers lure buyers. It is perfectly all right to treat oneself, but do not go overboard, say experts. Many times individuals go overboard with their festive spending and end up in debt trap. Here are five things you must do this festive season to ensure that you do not land in debt at the end of festive season.
Plan and purchase
“Distinguish between needs and wants. Avoid buying things that you do not need. This will save you a lot of money,” says Pankaj Mathpal, founder of Mumbai based Optima Money Managers. Buying things that are not required ruins one's finances. “Avoid buying something just because it is available on EMI,” he adds.
You should ideally make a list of things you will be buying this festive season. Sticking to the shopping list reduces the chance of impulse buying. Impulse shopping is one of the reasons behind accumulation of debt. “If you have saved money for your festive shopping, you enjoy upfront payment discounts. Such discounts are not available if you opt for EMI schemes,” says Kiran Telang, founder and director of Mumbai based Dhanayush Capital Advisors.
Is there a real sale?
Discounts are one of the obvious shopping ‘musts’ on e-commerce portals and brick and mortal retail stores. But do not jump the gun. Check if there is a real discount on offer. To do this you may note down the price of the gadget you intend to buy today and compare the prices when the sale is announced. There are many price comparison websites available that help you do so.
No impulse borrowings
The tenets of financial planning recommend buying things only out of your savings. However, many of us do not save but seek instant gratification. In such circumstances it becomes imperative to borrow. “Use credit cards wisely and pay your bills in full on time. Instead of salary advances it makes sense to use credit cards if you are sure you can pay back on time,” says Jitendra PS Solanki, an independent financial planner.
Credit card outstanding if not paid in full before the due date attracts interest at 3 percent per month in addition to the late fee charged by the card issuing bank. But if you time your spending right, you can enjoy up to 40-45 days of interest free money. Pay it in full before the due date and you are home.
If you opt for salary advance loans then you end up paying as high as 2 percent interest for less than a month. This can be avoided using credit cards, provided you are a disciplined person. If you still need money, compare and raise personal loans. However, negotiate hard on processing fee and repayment charges. It will minimize the adverse impact on your finances. More important- try to pay down high cost personal loans as soon as possible.
Gift it right
Try to pick the right gifts which will be useful to the person to whom you are gifting. “Go for financial gifting wherever possible. Even gold coins are good gifts as they are assets for the receiver,” says Pankaj Mathapal. Money transferred to your family members as gift is exempt from income tax. You can use it to your advantage to empower your family members.
Donate & enjoy tax benefits
While gifting we should also not forget those who are less fortunate. “You should ideally give back to the society. Identify a good cause such as education or healthcare and donate,” says Kiran Telang. Some donations such as contributions to Prime Minister’s National Relief Fund and National Defence Fund fetch you income tax benefit under section 80G of Income Tax Act. The donations specified in section 80G are eligible for deduction up to either 100% or 50%.
In this festive season you should also start saving for the festive season next year, if you have not been saving already. This will help you build corpus and achieve all your financial goals in a time bound manner without much stress.