How to get back your finances on track after festivals

Manikaran SingalCertified Financial PlannerAre you among those who have crossed Lakshmanrekha this festive season? Lakshmanrekha laid down yourself or by your financial planner in the form of a strict spending budget. With super long weekends in October, free time and so many discount offers online and offline it must have been difficult to resist the temptation to splurge!There are people who do understand the importance of structured and planned financial life, but are unable to follow a process with discipline. As the saying goes, ‘Rome was not built in a single day’. This applies to your finances too. Wealth generation takes time, discipline, efforts and a strict process. Your spending behavior is a part of the whole process which gets out of control especially in the festive season. When you see “Sale” going on in every nook and corner of the country and are not following a budgetary approach you tend to make mistakes only to repent in future.Below are some of the personal financial spaces which normally get disturbed due to untamed spending behavior. It must have happened with some of you also. Now when the festival season is over it is time to look back on things and act to correct the mistakes.1. Emergency funding: Emergency fund is meant for emergencies which means crisis, difficulties or whatever name you want to give it. Surely crisis does not mean “Never before offer” or “Last minute deals”.

It takes months, sometimes years to build emergency fund but once it gets accumulated and is available in your bank account it looks like easy money to be withdrawn for those ‘wants’. Most of you must have taken out some amount from the emergency fund for your festival purchases.  So first things first, replenish the emergency fund account from next month’s salary and make it a point to use the money in case of emergencies only. 2. Credit card loans: Credit cards are another source of easy money which gets easily swiped or punched in for internet purchases. Cash back, EMIs or Loan offers make the purchase looks more attractive. Impulsive buying is very common when you use credit cards. It makes you spend more as you tend to find it easy to pay back in EMIs, without considering the cost of the loan. It’s a well-known fact now that credit cards are the costliest form of credit. Converting your purchases into EMIs is equivalent to asking for loan. If you have done so in this festive season then you must understand that this behavior is lethal to your financial life. Correct this mistake by closing off this loan or EMI structure as soon as possible, preferably in the next month only. It’s not too late yet.3. Overdue Insurance Policies:People delay their insurance premiums payments due to mismanaged cash flows and heavy spending in festival season. Actually they want to take advantage of the grace period, without understanding the real meaning of it. In a life insurance policy, insurance cover remains active during grace period, in health insurance policy the cover lapses if premium is not paid on due date. If the insured person requires hospitalization during the grace period then the health insurance company will not pass the claim. Grace period is a benefit offered where insured can pay the premium within a certain period generally one month after due date without inviting penalty. It is meant for continuity of the plan and not necessarily continuation of cover. So those of you, who have missed their insurance premiums or are delaying it intentionally, must pay it at the earliest.4. Investment allocation:There are so many reasons of buying gold in India and this festival season is one of them. By terming it as auspicious purchase, people buy gold during Navratras, Dhanteras, and of course during Diwali too. I tried to find out the reason behind this purchase and went through the stories attached to these festivals, and no where I found that gold “should” be purchased or is “auspicious” to purchase. I believe that Diwali has always been more prosperous for the sellers rather than buyers.From investment planning point of view gold should never be over allocated in your investments portfolio, even for short or long term investments gold should not be more than 5-10% of your investment portfolio. Just have a look at your investment portfolio and rebalance it as per your asset allocation.Festivals are meant for getting together, family reunions and spending quality time with your near and dear ones. To make it happy and prosperous you should spend some time with your finances too and use it wisely. Make financial planning a way of life. Have strict investing, spending budget. Don’t misuse your credit cards, stay away from loans at least for unnecessary wants and stay focused on goals.