Control your Diwali splurge

If you have already gone overboard, increase your savings over the next three to four months

IDFC Mutual Fund's latest advertisement shows how people go diwala (bankrupt) during the Diwali season by splurging on things that they do not need at all. The lure of hefty discounts drives consumers to replace televisions, air-conditioners or even cars. The advertisement advises people to invest rather than blow money on unwanted things - an advice that Deepali Sen, a Mumbai-based financial planner, recently gave to her client. The client was advised to start a systematic investment plan of Rs 10,000 from October. But she has deferred it to January because she has already spent excessively on Diwali shopping.

"If you are planning to upgrade your television or air-conditioner, you will get good deals during the festive season. This will also satisfy your urge to shop,'' says Sen, founder, Srujan Financial Advisors.

What most people forget is this: Even if you are buying something at a 50 per cent discount, you are spending the rest 50 per cent. So, it is not saving but spending money. "These are expenses and not assets. Hence, pick a budget and stick to it,'' points out Balakrishnan Venkataramani, founder of Vensiva Financial Solutions.

Life isn't an EMI

A common purchase that many people make during Diwali is a car. But before buying, ask yourself how regularly you will use the vehicle. Whether you will use it for your daily office commute? Or are there senior citizens in your family who find it difficult to travel? If your use is going to be restricted to, say, weekend trips once a month, then you don't need to buy a car,'' says Venkataramani. Instead, start an SIP or a recurring deposit with the amount you would spent as EMI. "Buying a car involves not just the loan repayment but also additional expenses like maintenance, parking charges, etc. If you really want to own a car, go for a second- hand one. Another common expense is vacations. And since they are also available on EMIs, people tend to go for them. But remember that a four-five day vacation, the EMIs may have to be paid for the next six to eight months. Having a holiday budget makes much more sense.

Damage control

  If you have already swiped your credit card for huge amounts, Sen recommends lumpsum investments for the next three to four months to bring your savings back on track. "If you have been saving Rs 40,000 a month through SIPS, but have incurred sudden expenses on shopping and gifts, ensure that you save an additional Rs 10,000-15,000 per month for the next few months even if means reducing other key expenses,'' she advises.

Spend smart

Most banks offer cashbacks on credit and debit cards. A little bit of mix-and-match on the card that will big maximum benefits in a store or e-commerce website will help reduce costs.