The festive season has begun. It starts with Ganesh festival (at least in some parts of the country), then Navratri, Diwali, and all the way to Christmas and the New year. The retailers also want to cash in on the festive mood and launch sales deals, discounts, and cashback offers during the period. This is not a bad time to pick gadgets, accessories, home appliances that you have been eyeing for a long time. You can reduce the cost through discounts, rewards, and cashback deals.
However, these discounts and cashbacks are also a reason why you may end up overspending. You may find a few deals irresistible. You may buy products you didn’t plan to simply because of these deals. Not always good. You don’t want to bite more than you can chew. You shouldn’t spend more than you can afford.
In this post, let’s look at some of the ways through which you can control your expenses during the festive season.
#1 Planning Helps
This is the most important and perhaps the only solution. The rest of the suggestions are just offshoots of this.
When you plan, you get a firmer sense of where you stand financially. With that knowledge, you are likely to spend within your limits.
When you plan, you have a firmer answer to the following questions.
- What can you afford and what you cannot afford?
- Whether you can purchase right away or whether you are better off delaying the purchase by a few months?
- Whether you should buy by paying upfront or whether you can manage cashflows more effectively by spreading the outgo over a few months/years by way of EMIs?
When you plan, you focus not just on those couple of festive months, but also on the expenses coming up in months after that.
Planning also helps curb impulsive purchases. When you have a better sense of your financial health, you will likely spend within limits.
By the way, you don’t just plan about what you want to buy in the coming festive season, but also accumulate funds for the impending purchases. For instance, in June or July, you prepare a list of items worth Rs 1 lac that you want to purchase or must purchase in October and November. Then, you set aside Rs 20K-25K per month for the next 4-5 months and spend it during the festive season.
Planning keeps your spends in check and your finances sorted.
#2 Don’t Use Credit Cards Much. Less Credit and More Debit
When you pay from your bank account (debit card, net banking, or UPI), the bank SMSes will tell you how much is left in your bank account. You can’t spend more than you have in your bank.
With a credit card, not only can you spend the money you don’t even have, but you also lose track of how much you have spent during the month. The banks don’t tell in an SMS how much you have spent during the month. Yes, you can log into mobile banking app to figure that out. OR reverse engineer using the “available credit limit” in the message. However, this calculation does not really help if you have any EMIs on your credit card or if you use multiple credit cards.
Hence, if you are too concerned that you will overshoot, it is better to pay directly from your savings bank account.
#3 Retailers and Banks Won’t Make It Easy for You
Both banks and retailers are smart. They offer discount and cashback schemes, mostly on credit cards. Not on debit cards or UPI payments.
Two reasons for this.
Firstly, Credit cards are a more lucrative business for the banks. Merchant discount rates (MDR) are higher than debit cards, hence the banks make more money on credit cards. The banks do not make any money on UPI payments (at least on direct debit from bank accounts).
Additionally, credit cards are a credit product and open avenues for the banks to cross-sell other credit and non-credit products. Look no further than those almost daily personal loan offers that you receive from the banks where you hold credit card accounts.
And these promotions (discount/cashback offers) don’t come cheap for the bank. Yes, the retailer or the merchant may share part of the cost but still this costs a lot to the bank. Hence, if I were to spend money to promote/advertise a product (to get new customers to sign up or to incentivize existing customers to use it), I would rather promote a credit card.
Secondly, with a credit card, you can spend more than you have.
With debit cards or UPI, you can only spend as much as you have in your bank account. So, there is an automatic limit of how much you can spend.
There is a credit limit in a credit card too, but that limit is likely to be a much higher than average balance in savings bank account for most of us.
The more you spend on your card, the more money the bank makes. Clearly, promoting a credit card is a saner choice.
Enough of digression.
If you set a budget (or have planned), you will likely get through this too.
You can set up spending limits on your cards too, but I am not sure if you will stick to those limits unless you have thought through the funding part (planned in advance). Increasing spending limits on your credit card takes just as much time as setting spending limits. A few seconds. Hence, I just really see setting spending limits as much of a defense.
#4 Don’t Try to Keep up with the Joneses
Do you really need to have everything that your friends or neighbors have? Many times, we buy things simply because a close friend or people in your circle have it. A bigger car, an expensive phone, or the best gifts. And later regret such purchases. You realize that the value is not worth the cost.
I understand it is easier said than done but you must draw a line somewhere. Control those urges. And I think this is where planning can help. When you are aware of your financial health, it is easier to resist these urges.
Sometimes, it is a mindset issue too. We tend to attach greater value (quality or appropriateness) to more expensive things. That’s not always the case. Many times, the gift of your time and care matters much more than any material gift. And you know that.