CA Mahalakshmi's tips on managing finances during festive season are GOLD!

Many of us overlook the importance of financial management during the festive season only to suffer from the financial burden after the fun is over! Here are some tips shared by CA Mahalakshmi that might help you manage your finances during festive season and plan life in a more efficient way. 

Managing finances during festive season is as crucial as enjoying the festivities. However, many people struggle to do this effectively. The allure of extravagant gift-giving, holiday decorations, and special events often leads to overspending, accumulating debt, or neglecting savings goals. The pressure to conform to societal expectations can cause people to overlook their budget. Moreover, the emotional aspect of the season may cloud judgment, making it difficult to resist impulse purchases. It's essential to strike a balance between celebrating and maintaining financial responsibility during the holidays to deal with the post-festive season financial hangover. For everyone preparing to step into the season, CA Mahalakshmi has a few tips to avoid common financial mistakes and ways to make better decisions during festivals.

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Here's what she had to say!

Overspending: The temptation and the trap

During festive shopping, we often forget to keep a tab on how much we spend. Overspending is the most obvious trap. I get it, it's tough to resist when literally everyone - brands, influencers, celebs are trying to get you to 'add to cart'. Most people falter a little, it's only human. But the worst thing you can do is take on debt to buy things you don't need. Credit cards and BNPL options are so accessible today, which makes it easy to fall into this trap. When it comes to Diwali, people go a little overboard with gold. It's easy to justify to yourself that gold is an investment, so it's okay. Gold jewelry is a good investment, we all should know this by now. It's not wrong to buy jewelry, I'm all for self-pampering. But be honest with yourself. You're buying jewelry to look and feel good, that's it! This will help you stay within your budget.

Sometimes people are aware that they are overspending but they don't quite know what to do next. The best thing to do is to invest all the money you aren't going to use. If you don't have access to the money, you can't spend it. Secondly, have an accountability partner! So many people do this for fitness but it's a great way to build financial discipline too. Once you and your accountability partner have made a list of things you need to buy and set a budget, have regular check-ins to see how you're doing. Discuss what you really need before all the crazy sales kick in. And then discourage each other from buying things you don't need. If you feel unsure about a purchase, check with your accountability partner.

Reducing unnecessary spending by having an amount set aside just to do 'fun' things helps. We know it's not realistic to ONLY spend on things we need. So set aside some money for the unnecessary things. Once you've exhausted your fun budget, be okay with only spending on things you need. However badly you want to order in or go out for drinks with friends, don't do it. This way, you won't feel guilty about spending and you'll feel good about having some fun.

Creating a budget for managing your expenses

To avoid overspending during festive season, it's essential to create a budget. But most people overlook the importance of it or don't know how to go about it. Set goals, both short term and long term. And I don't mean financial goals. Remember, we make money to live, we don't live to make money. So the first step is to set goals for how you want to live your life. Forget about the money; what do you need to do on a daily basis to lead a happy, comfortable life? Maybe you need 3 OTT subscriptions or want to eat only organic vegetables. What do you need two years down the line? Do you want to buy a car? Make a down payment on a house? Think about such questions first, and you'll automatically have a budget in place.

Zero-based budgeting in personal finance

Though the approach of zero-based budgeting is common in the corporate world, it can also be used to effectively plan your personal finances. Companies look at all their expenses every year and justify each one from scratch, instead of just taking the previous year's budget and adjusting it. This is a brilliant method to adopt for personal finance as well. We all tend to upgrade our lifestyle every time we get an increment, and this isn't always financially healthy. Using zero-based budgeting can help combat this. Start your budget afresh every year, don't just add new expenses.

While various budgeting tools and apps are available, choosing the right one often depends on personal preference. However, simplicity and flexibility are essential. People get too caught up in things like which apps to use. When I first started earning, I also went into a rabbit hole of tools and apps to manage my finances. But in the end, I chose good old Excel. My favourite analogy is - you'll burn the same amount of calories if you work out in an old t-shirt or in the latest fancy gym wear. It's the same with apps and tools. It mostly doesn't matter but if you need to use one to get the job done, go for it. I love Excel for its simplicity and flexibility. I make a new column for each new month. It's also helpful to have historical numbers, I make graphs to see how things have trended and to see where I can make improvements.

As you gear up for the festival, it's crucial to be mindful of your financial decisions and to create a budget that aligns with your goals and values. With these insights, you can make this festive season financially fulfilling and enjoyable without falling into common financial traps!

I hope that these tips help you make the right financial decisions!