Personal finance

5 personal finance rules to keep in mind during the holiday season

Festive sights and sounds fill the air. As I peek out of my balcony, decorative lights go up in most of the apartments. These bright and colorful lanterns will shine long after Diwali, sometimes until New Years. They literally hang from every balcony. Year after year, the way we celebrate is a showcase of improving family finances for the normal urban household.

Aging writers like me can’t help but take the nostalgia trip. But looking back to the 1970s offers some interesting insight into how far we’ve come; and the dangers of trying to go back, fully interpreting the atmanirbhar sentiment. At that time, festivals were straining family finances. There was an annual bonus that would be announced closer to Diwali. Much depended on this payment. Buying clothes was a ritual that involved hunting for bargains and happily taking treasures out of the trash cans at a discount. Waiting anxiously at the tailor and being heartbroken by the shoddy workmanship was normal. The crackers were busted in large groups of friends, so everyone enjoyed the fun. We competed to find out which front yard had the most waste paper. The sweets were made in Dalda, conveniently called ghee. Desi ghee was the name of the pure version. Clay diyas, Navratri fasting diets, decorating with dolls that were stored and reused each year, and purchasing this occasional appliance for the household were also common.

So much has changed now. Clothing is purchased regularly; no one expects a festive occasion. Tailors are an endangered tribe, like the rule of ready-to-wear. Dried fruits and nuts are used so much, regardless of their high prices. Zero percent consumer loans are the norm, and everyone is buying and replacing home appliances with abandon. Meals made with festival treats are made to order throughout the year so kids don’t have to wait for festivals to eat them. Rationing quantities is not the norm either. We have moved on to more ostentatious spending on jewelry, decoration, and big ticket purchases like property. Every event from Karva Chauth to Chhath Pooja is now national, celebrated in detail in all communities. The proof of better purchasing power is all around us. We always love a good deal, but our propensity to spend has only increased over the years.

The growing awareness of health and the environment is welcome. Kids don’t want to create crackers that blow up noise and air pollution. Many are overwhelmed by the distress the noise creates for pets, the elderly and the sick. There are regulations on when crackers can be popped. Dalda moved to make way for pure ghee, and households pay high prices for the real product. The most health conscious consumers avoid sweets and sugar and stick to basic healthy choices. The ordinary middle-class urban household does not seem to show stress and tension when it comes to festivities and celebrations. Some thoughts on personal finance for the holiday season – here’s a list:

First of all, make sure your expenses match your income. It’s a good idea to keep a percentage allowance, so you know how much you can realistically afford. If 10% of your annual income is spent in the last three months of the year on festivities, make sure it won’t hurt your long-term goals. Draw that line mentally, get your family’s buy-in in the decision, and enjoy the expense as a reward for you and your family. Having a global budget is a good way to keep expenses from compromising other financial goals. It also hopefully motivates Conservative spenders to spend their money boldly.

Second, make a mental distinction between experiences and material objects. When you remember an earlier Dusherra celebration, you are unlikely to remember how pretty that expensive glass bowl you bought looked on your dining table. Most likely, it has already given way to something else. But you will remember how you forgot the rasmalai in the fridge; how your long lost friend found and called you; how you won the family card game; and how much you laughed when your spouse forgot their glasses. What looks like an ordeal usually becomes the most repeated family story. Collect these experiences; don’t let things rob you of money and attention.

Third, remember that there is a limit to appreciation and acceptance by strangers. What looks like appreciation may be tinged with a jealousy that you haven’t yet identified. Much of the wastefulness of personal finances has its roots in trying to impress people who are not very important in your life. You might fail to identify true friends, if all you love is being around people who will congratulate you and soothe you. Don’t equate pleasure with spending money on things and people just with the intention of impressing. Your money has better uses.

Fourth, be nice to those who are less privileged than you. In a country with so much income inequality, ostentatious exposure of wealth and money is cruel for the underprivileged. It is nice to be sensitive to these differences. It’s even better to open your heart and your purse to bring some joy to others around you. If the gifts help those you don’t know, be sure to include those you know. Give your staff a break and a bonus to enjoy the festival as a family. Do your part to spread the festive joy.

Fifth, look carefully at your treasures that you are not using. This piece of land that you have never visited; that one-room apartment that you can’t maintain; those expensive clothes that you no longer wear; those jewels you no longer want; and those artifacts and items that you have filled your house with. If something isn’t part of your daily life and joys, why bother carrying them around? Find the time and the heart to let go. You might find better uses for the money that’s locked in; or you can find better things to do with your time and effort; or you may find that the “other time” when you use them isn’t going to come anytime soon. Make the holiday season a time to clear up the mess.

Our joys come from unknown sources; our sustainable sources of happiness do not always cost money; and our sense of purpose in life might force us to look beyond the daily grind. Making it into a new life worth living is always your choice, and you can start anytime you want.

(The author is President, Center for Investment Education and Learning)

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