Budget To Indulge: Plan Your Festive Spends To Not Break The Bank

Most of us are guilty of overspending or being more emotional in our spending during festive seasons. The season of giving inflates spending more than what a normal monthly budget accounts for.

Your little cousin’s tiny hand will tug on your pants and point at a sweet box with asking eyes. A few pricey kurtas will gain a place in the cart because your spouse says everyone at the office will wear fancy clothes.

Not going empty-handed to a relative’s place will cost you a few bucks. The price drop on the sneakers for the festival sale will make them look good enough to splurge on.

Festivities pinch pockets, whether one is prepared for them or not.

To break it down, some of these seasonal spends may be obligatory, while some others may be to meet certain social expectations. During jubilant times, the urge to spoil oneself or splurging on loved ones is something that cannot be easily avoided.

“The strong performance of the equity market has made individuals feel wealthier. This is known as the 'Wealth Effect'. It implies that individuals spend more when their wealth increases, though their income does not,” said Larissa Fernand, a behavioural finance expert.

People tend to blow up money on peer-pressured purchases. These purchases may be extra or even useless, as they are just the cost of keeping up with a certain lifestyle. So, to get around it, Fernand suggests prioritising purchases.

Figuring out exact plans for the season with family could mean accounting for travel, wardrobe for events, and catering for guests, among other expenses.

Doing this can help discern discretionary spending better. This will allow one to decide where to spend money and where to hold funds backs.

When there is a gap between the money one has and the things one wants to spend on, borrowing will look like the easy way out. It is important to steer clear of credit card debt while funding indulgences.

Borrowing money from family or friends is not ideal as well, because one will need to pay them back at some point. And using an emergency fund for seasonal splurges may not be a good idea.

“Overspending is inevitable, but don’t let that be a hindrance. As long as your portfolio is invested and you are continuing with your SIPs, there is no need to beat yourself up. Money is meant to be enjoyed. So, indulge and splurge within boundaries," said Fernand.

Budgeting during the season need not be complicated. Thinking about how much one needs to spend and how much one can actually spend can be a start.

"During festive seasons, people often want to upgrade their phones, buy jewellery, cars, and more. All these items are bad debts because these assets do not appreciate. Borrowing to buy assets that depreciate also comes with interest that will add to the debt," said Santosh Joseph, founder of Germinate Investor Services LLP.

An ambience of spending is set by marketers, who are set on getting people to spend more than they plan to. Companies play into the mood of the season to push the fuzzy logic and showy splurges that accompany the festivity.

"Begin by budgeting. Think about the quality and sustainability of these seasonal purchases. Avoid discretionary purchases that may not have any benefit in the future," he said.