This Diwali Lighten Up Your Financial Well-Being with These 5 Financial Lessons

Diwali is one of the biggest festivals in India; this auspicious festival is dedicated to honour the return of Lord Rama to his homeland Ayodhya after spending 14 years in exile and after his victorious battle against the demon King Ravana.

Diwali is celebrated every year with a lot of enthusiasm. You must all be busy making arrangements, buying firecrackers, sweets, and gifts for your loved ones. Apparently, celebrating the festival of lights also entails a captivating array of actions focused on wealth creation and prosperity.

Diwali is a festival of dazzling lights and family cheer, while you are busy decking the halls and lighting up the neighborhood, your finances shouldn't be left in the dark.

Apart from the cheer and optimism, the festival of lights also offers financial planning lessons. Many individuals may have received their Diwali bonus and/or cash presents; instead of spending it on fleeting materialistic wants, save a meaningful portion of it and invest prudently.

[Read: 5 Festive Season Tips: How to Spend Wisely and Keep Your Budget on Track]

Millennials especially should subscribe to the idea of delayed gratification rather than splurging impulsively purchases, such as a smart device, expensive iPhone, laptop, or designer clothing, etc., as it will serve in the interest of your long-term financial well-being.

How often do you consider that having a solid financial plan will help you deal with any financial challenges you may face in the future?

The current market conditions are volatile due to fluctuations in various macroeconomic factors. As a result, it would be wise to consider measures to improve your financial well-being this Diwali.

You should not just concentrate on earning but also need to manage your hard-earned money effectively to ensure a secure financial future. Diwali is the best time to bring that change ahead and take care of your and your family's financial well-being.

[Read: Earned Diwali Bonus and Cash Gifts? Invest in Mutual Funds to Brighten Your Financial Future]

Diwali celebrates the triumph of light over darkness. The five-day festival is a reminder to secure finances, dispel the darkness of ignorance and boost fortunes with robust financial planning.

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Let us now have a look at what are the key takeaways you can learn this year from each day of Diwali celebration:

Day 1 - Dhanteras (Day of Fortune)

The first day of Diwali is known as Dhanteras. 'Dhan' means wealth, and 'teras' refers to the 13th day of a lunar fortnight in the Hindu calendar. Dhanteras or Dhantrayodashi is a Hindu festival celebrated to worship Lord Kuber, the god of wealth and Goddess Laxmi.

On this day, people buy various items symbolising prosperity and wealth, such as the purchase of gold, silver, and brass items, which brings good fortune, prosperity, and protection from evils. Fortune favours those who plan for the future.

It's never too late or too early to start financial planning for your future goals. The first day of Diwali is a symbol of annual renewal, cleansing, and an auspicious beginning. Everyone needs to evaluate their finances, cleanse themselves of bad financial habits and make prudent investments.

Begin with defining S.M.A.R.T. financial goals as well as making goal-based investments to ensure you have a sufficient accumulated corpus in times of need. You may consider a budgeting exercise that helps you assess your cashflows, eliminate unnecessary expenses, and allocate money for savings and investment purposes.

Day 2 - Naraka Chaturdashi (Day of knowledge)

The second day of Diwali and its rituals are to liberate any souls from their suffering in Naraka, or hell, as well as a reminder of spiritual auspiciousness.

The lighting of lamps and diyas during Diwali, which is observed on a new moon day, symbolises the destruction of evil and darkness. Similar to this, identifying financial mistakes and not repeating them might help you achieve your desired objectives. It's possible that you selected the wrong financial product that consistently underperforms and steers you away from your financial goals.

The key to investing successfully is adequate financial knowledge. Most of us suffer from low returns on our investments, debt traps, being underinsured and having insufficient funds for retirement. Lack of financial awareness and understanding of managing personal finances is one of the major causes of such issues. You need to enhance your financial literacy, and doing so will be beneficial to your long-term financial health.

[Read: Financial Literacy: Beware of Bad Advice, Financial Frauds And Mis-selling of Investments]

In some regions of India, the day is allotted to the worship of Mahakali or Shakti, as they believe that Narakasura was killed by Kali on this day. Similar to this, you might think about establishing a debt reduction plan to get rid of the bad financial burden on your personal finances. One needs to be financially literate to avoid falling into a hole of dubious investments, debt burden, and make informed decisions.

Day 3 - Laxmi Puja (Day of wealth and prosperity)

Lakshmi is the goddess of wealth and prosperity. On the night of Lakshmi puja, rituals across India are dedicated to the goddess of wealth to welcome her into their clean homes and bring prosperity and happiness for the coming year. Laxmi Puja is performed to worship the goddess to resolve all financial issues, remove all obstacles and hurdles related to career and business and bless with success in all life ventures.

Precious metals like gold and silver are purchased on this day in the belief that they will be the harbinger of good fortune. These rituals remind you of the importance of asset allocation and maintaining diversity in your portfolios.

Your path to wealth creation should be driven by your objectives and capability for taking calculated risks. The key to ensuring financial stability is maintaining appropriate diversity through proper asset allocation because the right mix of assets in your portfolio across asset classes, such as equity, debt, and gold, acts as a buffer against turbulent market conditions.

Many of you must be planning to buy gold jewellery during Diwali, instead, one may consider investing in gold mutual funds (i.e., Gold ETFs and Gold savings funds) to avoid the hassle of storage and security of physical gold. However, do note the investments you make and frame an effective asset allocation are based on your risk profile, investment horizon and objectives.

Day 4 - Padwa (Day of New Year)

The day after Laxmi Puja is the first day of the bright fortnight of the lunar calendar. Considered as the first day of the New Year and is celebrated by offering prayers to Krishna. One must apply a similar approach of the new year and new beginnings to their investments by conducting a periodic portfolio review.

[Read: How to Analyse Your Mutual Fund Portfolio?]

Identifying investments that are underperforming is crucial. Review the investment portfolio and make sure that the current investments are in line with your risk profile, financial situation and desired objectives. Review the investment portfolio thoroughly to ensure it includes worthy investments, and one may also need to exit from the schemes that consistently underperform.

Day 5 - Bhai-Dooj (Day of celebrating togetherness)

The last day of Diwali, which is Bhai-Dooj, is celebrated with siblings and family. In some traditions, the women recite tales where sisters protect their brothers from enemies that seek to cause them either bodily or spiritual harm.

As siblings come together to celebrate Diwali, promising to look out for and protect one another, it is equally important to protect your life and health by purchasing an adequate insurance cover that will provide a safety net for your family in the event of any unforeseen emergency. Life is unpredictable and may throw curveballs at us at any time; thus, it is crucial to insure yourself and your loved ones to avoid any financial difficulties.

You can use your festive bonus or the amount of cash gifts to purchase insurance coverage for life and health. It will assist you against the increasing medical expenses and provide you with a cover to survive the tough times. With increasing uncertainty in life, having insurance cover is essential as it protects you from sudden expenses in challenging times. You may also consider gifting an insurance cover to your sibiling as a Diwali financial gift.

[Read: Importance of Insurance | Why Do You Need Insurance Cover]

Additionally, you may create an emergency fund that holds expenses for 6-12 months, including your loan EMIs. You may consider investing in liquid mutual funds as an emergency fund as it would offer you slightly better returns than your savings bank account. It will help you survive during unexpected emergencies and will serve as a safety net for you and your family in times of need, preserving your financial stability and providing you peace of mind.

[Read: 12 Common Financial Planning Mistakes And the Ways to Avoid Them]

To conclude...

Diwali is a great time for reassessing your personal finances and goals. It is an ideal time to identify the way forward with your financial planning. This Diwali, maximise your celebrations by considering what you need to do to improve your and your family's financial well-being, so you can have a safe and secure financial future. You can implement the following key takeaways from this festival of lights into your life at the earliest.

Lighten up your finances this Diwali by taking the various aforementioned steps and celebrate a safe, sparkling and financially well-planned Diwali!

Wishing You all a Very Happy and Prosperous Diwali!

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

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This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.