The festive season is upon us, and the natural urge is to spend. While this is a human tendency, this is not a very good idea. During this period too various organizations like banks, credit card companies have various schemes that tempt the wallet, but are disastrous on the finances.
Experts point out the pitfalls and how to avoid them.
“Festivals are always filled with hope, bonuses, and sales, but overly hopeful tendencies can result in bad monetary decisions,” says Anurag Goel, Director at Goel Ganga Developments.
People, by default, make the mistake of an over-emphasis on consumption in the near term (read festive season) -gadgets, lifestyle expenditures, without matching them with long-term objectives.
Another error is not considering the already-large debt burden; shopping during festivals usually incurs credit card EMIs that quietly accrue. Most also pursue “festive deals” in money products without considering real returns and risks.
“Festive periods are the time when most middle-class families become the victims of emotional spending and investment mistakes,” agrees Mukesh Pandey, Director of Rupyaa Paisa.
A common mistake is considering the festival bonus or additional money as “free money” and indulging in the purchases of consumer electronics, apparel, or gifts without a strategy, only to regret it later when there is an unexpected bill.
Another common error is pouring funds into products pushed by marketing blitzes (e.g., “festival special” mutual funds or schemes) without evaluating their fundamentals or suitability. “I’ve seen households commit to long-term financial products under the festive fervour, only to struggle with liquidity later,” says Pandey.
“We also see people dipping their emergency savings, opting for zero-interest EMIs and rushing into festive offers without enough research, while essential planning like Insurance & investments usually takes a backseat,” says Rajeev Gupta, Head- eGovernance and Third Party Products, Religare Broking.
A simple discipline of continuing SIPs, sticking to asset allocation, and adding diversified options like digital gold can help you celebrate without compromising on your financial security. This way, festivals will bring lasting joy, not financial stress.
Don’t let “Festive Offers” fool you
Financial experts point out an error in savings during the festive season. Yes, you read that right. Even in your savings, you should carefully analyze before making your investment decisions.
“During the festive season, banks introduce flashy schemes to get more retail participation,” says CA Kashish Gupta, FCA, Partner – SHK & Associates. This seems counterintuitive, correct? How can savings be a bad thing?
Banks would offer a marginally enhanced rate on fixed deposits, or waive loan-processing charges, or offer value-added services such as cash back or vouchers. Mutual funds and insurance companies would intermittently come up with short-duration schemes to persuade investors to start or continue SIPs.
“What most investors miss is that such offers tend to be cosmetic in nature-not altering the inherent risk-reward profile of the product,” says Gupta. An increase of 0.25% in FD returns, for instance, is beneficial but not a game-changer in the overall financial plan.
Experts point out that festive benefits need to be considered as strategic sweeteners and not pretexts to commit long-term capital. “The decision must always tie back to one’s cash flow and asset allocation goals, rather than the holiday hype of promotions or gift offers,” says Gupta.
Banks also conduct festive promotions, or charges can be waived or reward points offered, mutual funds can provide zero-expense ratios or exemption of exit loads for short-term redemptions, or fixed deposits can pay a marginally higher rate over festival periods. “Such time-limited offers should be scrutinised carefully: ensure that the advantage is superior to the compromises (lock-in durations, liquidity) before opting in,” says Pandey.
When real estate offers make sense
Speaking of limited-time offers, there is one such scheme that may be considered during this season: real estate.
Realtors note that this time of the year (festivities) is also when bank tie-ups become profitable for the buyer-subvention plans, charges waived, or bundled insurance can minimize upfront cash pressure on homebuyers. All such advantages tend to be worth more than a mere “discount” on paper as they enhance affordability in actual terms. “The forgotten fact is that festival season offers, when taken together-developer discounts, state-government rebates, and bank leniencies-can reduce real estate buying much cheaper on the wallet than at any other time of the year,” says Goel.
Spend smart, not hard
“Credit cards, though convenient, are to be treated with respect,” advises CA Vishnu Agrawal. If you have to swipe, make sure to pay the entire bill on time. Shun converting purchases into EMIs unless absolutely indispensable; “zero-cost” deals tend to have opportunity costs hidden in them.
Most importantly, emphasize experiences, not extravagances. The greatest gifts are usually time, thought, or attention – not always the priciest thing on the menu. Parties are supposed to be about celebrating plenty, not about creating financial stress. “Where there is joy and judgment together, celebration is sustainable – and your budget remains as radiant as the lights that illuminate the season,” says Agrawal.
Another pitfall is relying on high-cost credit cards with annualised rates of 30 to 40%, creating a heavy repayment burden later. “The smarter choice is to keep festive spending separate from long-term financial goals, so that celebrations do not erode carefully built wealth,” says Chirag Muni, Executive Director, Anand Rathi Wealth Limited.
The better approach is to plan festive spending well in advance by setting up a systematic savings method. For instance, putting aside just ₹5,000 a month from April can create a comfortable festive budget of over ₹30,000 plus returns by Diwali, allowing families to celebrate freely without compromising their long-term goals, suggest experts.
Anand Rathi Wealth gives us a suggested example of how a person who has a media ₹70,000 salary and an average of ₹50,000 bonus could possibly plan their finances during the festive season.
“The festive season naturally encourages higher spending, but the real key is balance,” says Muni. Setting a budget in advance and prioritising essential outflows such as rent or loan instalments ensures you do not compromise long-term stability. Tracking your expenses during the season is equally helpful, and using cash or a debit card instead of credit makes you more conscious of how much you are spending.
“The healthiest approach is to plan, enjoy the celebrations within your means, and strike a balance where festive joy does not come at the expense of financial peace of mind,” ends Muni.