With the festive season around the corner, we are looking forward to spending some quality time with family and friends. However, with festivities comes the risk of over-spending and throwing our finances out of order. To avoid the post-festival financial stress, here are five simple steps you can take:
Plan before you purchase
If you haven’t made a budget for the expenses you are likely to incur during the festivals, you should do it immediately. This will involve identifying what you can actually afford to spend without hampering your usual household budget, investments, emergency funds or any money earmarked for an important future goal. Prepare a list of your planned purchases and see what all is feasible, and if need be, prioritise or re-think your expenses.
Avoid impulsive spending & borrowing Unplanned big ticket purchases
during festivals often lead to major regrets later. Ensure your purchases are planned for, and they will not lead to straining of your finances. If you are opting for a loan for home renovation or buying expensive items, make sure you will be able to repay it timely. Before applying for a loan, compare all options from various lenders, to ensure you choose the best product on offer.
Watch out for burgeoning credit card bill
A credit card’s ‘buy now pay later’ feature often land many in trouble during festival time due to over-spending. Credit card users should keep a close track on their spends during the festive season, to avoid concerns at the time of repayment. Not paying your credit card bill in full in time leads to heavy charges, which will only worsen the situation. Try and use EMI conversions and availability of attractive rewards, discounts and cash-backs through your credit card.
Be prudent while utilising your festive bonus
Many organisations give bonus to employees during festive season. This extra amount in the form of bonus, must be used with great prudence to maximise its value.
While some may consider utilising it towards meeting various festivity expenses, there are other possible ways to put your bonus to good use. In case you have multiple debts, consider prepaying the costliest one (usually personal loan or credit card debt) with this bonus amount. Or else, you can invest this amount in mutual funds, through SIPs, for achieving a set financial goal for which you haven’t yet begun investing.
Avail tax deductions when you donate
Festivals are a great time to start giving back to society. However, many donors aren’t aware of the tax deductions available on such donations.
Under Section 80G of Income Tax Act, donations made to certain funds and charitable institutions would be eligible for tax deductions, with a maximum cap of Rs 2000 on deduction’s claim (for cash transactions), unless the payment is made through cheque, bank draft or electronic clearing system (ECS) through bank account or electoral bonds.
The writer is CEO & co-founder, Paisabazaar.com