Six Tips to Spend-it-Right this Diwali!

[Guest guest]

MUMBAI (October 18, 2006): Diwali, in today's times, not only brings

to mind bursting crackers, home made goodies, diyas and welcoming

Godess Lakshmi the Hindu deity of prosperity, but also learning to

exercising restraint, not giving in to temptation, and keeping and

maintaining that prosperity within the folds of your wallet.

 

If you are one of those sensible ones who have an exposure to the

equity markets, now is not the time to cash out and spend the loot.

This is the time to exercise restrain on your spending. It's very

easy to get carried away in the general euphoria of the season.

Rather than making your new-found wealth a classic case of easy

money; "easy come easy go," one could actually look at this current

run as a wealth accumulation strategy rather than splurge on stuff

that will be forgotten.

 

So here are a few tips, which might be useful before you embark on

your festive season shopping:

 

1. Keep a financial plan and stick to it

 

It's easy to go astray with your income when you don't know what and

how you are spending. A quick test to find out how seriously you

need a financial plan:

 

How much did you spend last month on groceries, clothes, eating out,

traveling (and do not refer to credit card statement for this) If

you can't give a figure close to the nearest '000's, its quite

likely your cash flows are running awry and you aren't saving as

much as you ought to be. Get your budgeting and planning done as

soon as possible.

 

It's advisable to build the plan at the beginning of the year

itself. This way the entire years expenses, savings and investments

are adequately planned and you don't tend to overspend at the

various occasions in the year.

 

2. Understand your spending habits

 

Are you an impulse shopper, a shopaholic who de-stresses through

buying in the new age retailism or are you the sensible buyer, who

always knows what s/he wants and gets out of the store within 15

minutes?

 

Think about the last few times you went out shopping and attempt a

self-analysis on what your spending habits are.

 

In other words what really went wrong the last time you went

shopping? It's quite likely that the rice boiler you bought in last

season's "'festive bonanza sale" is still in its packing box, lying

unused in that kitchen cupboard which you only open during your

annual Diwali cleaning. Or the car polish and shampoo from the local

99 Shop is "somewhere" in the boot of your car.

 

If you are a frequent credit-card user, you could get an idea of

your pattern of spending and for what occasion it happened.

 

3. Some quick surefire ways to curb yourself from the impulse buying

are stop (and we really mean stop) and ask yourself:

 

* What has attracted me more to the purchase; the bargain or the

item in the bargain?

 

* Do I really need the item? How am I going to use to use it?

 

* Can I do without it? Have I been managing well without it?

 

* Would I rather see cash (saved from not buying that item) or the

item?

 

4. Never go shopping without a list

 

Diwali is the time for extravaganzas, bonanza, and dream offers.

It's easy to end up buying something you will never need and use.

 

Tide this problem by creating a shopping list before venturing out

to your favorite supermarket for your Diwali household shopping.

 

Equip yourself with a list of items you plan to buy and need. You

could also make envelopes for your budgeted items carrying just

enough cash for the shopping list. If you see "one on one free"

or "up to 50 percent off" - remember that there are no free lunches.

Check if there is a catch here, do you actually need either of the

articles?

 

Similarly, make a list of the people you would like to gift to. It's

advisable to go over the list over time in the coming couple of

days, to make sure that it's the final one. Pick something that's

usable, and within your budget. Scout around for the best deals.

 

5. Your credit card, your best friend or your worst enemy?

 

Plastic money with its "easy-to-make" purchases makes exercising

personal discipline and restraint a herculean task. In the heat of

getting a never before bargain in the ever popular mall, very ably

supported by the credit card, one fails to stop and understand the

importance of the purchase.

 

Always pay credit card dues on time. If you cannot pay your

chargeable out standings at the end of the month it's possible that

you are living beyond your means. It's easy to lose track of the

piling purchases one is making while swiping the card. That is till

the end of the month when the bill arrives at your doorstep.

 

As far as possible refrain from holding multiple credit cards. While

venturing out with the shopping list, carry as much cash as your

shopping list warrants or use debit cards and dump the credit cards

at home.

 

6. And we aren't telling you to give a miss to all those offers!

 

Of course, sometimes there are good consumer durable bargains during

the festive season; ideally understand all the features of the

product and any valid reason for why it is available in the bargain.

 

Also be a smart buyer and know prices at other retail outlets. While

paying off on the credit card, be aware of all the cash back offers

and no interest EMI (equated monthly installment) offers on your

credit card. Weigh the options and choose the most economic offer

for payments on credit.

 

Try to remember that your need for the latest gadget gets satiated

with its purchase, but with every such purchase you are moving away

from your long term goal of meaningful wealth creation. Do not make

your next impulse purchase at the cost of not meeting your financial

goals.

 

Of course, sending greeting cards is a thoughtful thing to do, but

sending e-card is not only faster but also save you the money as

well as help unclog the Indian Postal Service. And at least you are

assured that your Diwali greetings will reach way before Christmas.

 

To sum up, plan your spending to the hilt. As in the mighty ocean so

in your personal financial budget, every drop (read every Rs 100)

counts. An office Diwali bonus could actually turn out to be

a "bonus" income towards your financial goals.

 

The idea is not to be the local Uncle Scrooge or take a miserly view

to life. A good financial plan takes care of you reaching your

future goals without unduly compromising on your current life style

and your standard of living.

 

SOURCE: CNN-IBN. 6 tips to spend-it-right this Diwali. The author,

Prerana Salaskar is a Certified Financial Planner.

URL: <http://www.ibnlive.com/news/6-tips-to-spenditright-this-

diwali/24250-7-1.html>