5 Financial Lessons from the Festival of Colours to Enhance your Financial well-being

Holi is also said to be the festival of love and forgiveness. Interestingly, the festival of 'Holi' falls in the crucial month of March, which marks the end of a financial year and the beginning of a new chapter. You can hold on to the spirit of Holi and take inspiration from the festival to enhance your financial well-being.

There are a variety of reasons why we should really enjoy the event as well as gain some important financial lessons from it, ranging from socio-cultural to religious to financial. We all love this festival and celebrate it with full joy. The festival teaches us many lessons, of which we will today discuss some financial lessons that you can associate with it.

Let us have a look at the valuable financial lessons that can be learned and applied in our daily lives for a better and more secure financial future.

1. Get Rid of the Debt Burden

Just before the night of Holi, bonfires are lit to signify the burning of demoness Holika or victory of good over evil. Holika was the sister of evil king Hiranyakashyapu, who wanted to kill his son Prahlad just because he was Lord Vishnu's devotee. Holika was blessed by Brahma with a shawl that protected her from fire. But when she entered the fire with little Prahlad on her lap, she was burned to death, while Prahlad prayed to Lord Vishnu and came out without any harm.

Likewise, the debt burden is the biggest evil that could harm your financial health. Credit card payments and monthly Personal Loans, if not managed effectively, can become a debt burden, wreaking havoc on your financial planning and CIBIL scores over time. The lesson here is to burn all of your poor debt burdens. You should also take steps to clean up your debt burden, if any, and lower your high-cost debt. Though it may appear to be a difficult undertaking, it is an essential step in maintaining your financial well-being.

Hence, to avoid the financial burden and all that stress, pledge to clear your bad debts first. Burn those excuses and start saving to make yourself debt-free and eliminate late payments to avoid the rising burden of debts.

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2. Splash Colours of Diversification

Would Holi be the same if we play it with a single colour? Roaring red, pretty purple, blissful blue, gorgeous green, sun-kissed yellow - Holi is all about the diversity of colours. The diverse colours that we smear on each other make Holi more exciting and enjoyable.

Similarly, take inspiration from the riot of colours smeared and showered in Holi to diversify your investments. You might have heard it umpteen times that you should not put all your eggs in one basket. Hence, diversifying your portfolio to several other asset classes will minimise your risks and maximize your returns.

Different investment assets come with different risk exposure and return potential. A good mix is desired to balance the risk exposure thrown in by market-linked assets while earning above-average returns. Diversification is a technique that reduces risk by allocating investments across various financial instruments, industries, and other categories, which will help balance out your entire portfolio.

3. Play Safe and Maintain an Emergency Fund

The zeal and the enthusiasm of Holi prevails if one plays and takes adequate precautions. Ideally, one should play with organic colours that are not hazardous to skin, organs, or well-being with the least effect on health. This way, one can make the festival and celebration memorable for years to come. Similarly, life may throw curveballs at you that could be hazardous to your financial well-being.

Looking at the current scenario with uncertainties, it is prudent to maintain an emergency fund that carries monthly expenses for 12-24 months, including loan EMIs. This will act as a safety net for you in times of emergency. This financial lesson will help you reduce your risk of financial instability and maintain your financial well-being.

4. Reap the Sweetness of your Investments

Holi is also known for the exclusiveness of desserts such as 'Gujiya' and 'Thandai,' the preparation of which is not instant; and takes some time. It requires the involvement of correct ingredients for the delicacy to serve the sweet taste. Similarly, these sweet delicacies carry a financial lesson for you, as you could aim to make worthy investments that could reap your sweet returns over the long term.

As we are heading towards the start of a new financial year, you must plan your investments wisely and make worthy investments in various financial avenues as per your suitability based on your risk profile, investment horizon, and financial goals. For your investments to grow and be able to offer you better returns, you may make a sweet choice of staying invested, as wealth creation does not happen overnight or over a few weeks. If you remain patient and persistent, you can reap the sweetness of your investments.

You may opt to invest in mutual funds via a Systematic Investment Plan (SIP). It offers the benefit of compounding over the long term. Don't get distracted by every surge and fall in the market, especially with your long-term equity investments; stay put and do not panic.

5. Review and Rebalance Your Portfolio

Around this time of Holi, we look forward to sorting out all grief and miseries with anyone. "Bura naa maano, Holi hai" is the most popular catchphrase synonymous with Holi. This is because, on this day, people look forward to putting their past behind, forgetting all differences, and building new relations. Bring that spirit in managing your finances as well.

Review your investments time and again to check if your portfolio is relevant to your goals, income at the time, and market movements. Similarly, one should also periodically review their investment portfolio and observe the performance of their holdings.

You need to analyse the performance of your holdings based on various quantitative and qualitative parameters and avoid making any hasty decisions due to a market fall. You may see your investments underperforming during an unfavourable market phase which is normal. Still, if there is a consistent underperformance, then you may analyse the reason and switch your investments if required. Avoid any undue risk that these underperforming investments may cause to your portfolio.

Here the financial lesson you could learn is that you should prevent the mistakes that can hinder the growth of your wealth or pose as a hindrance on our wealth creation journey. Avoid making mistakes like making a decision with insufficient knowledge, hasty redemption, reacting to rumours, sporadic investment, timing the market, etc.

If we look keenly enough, we can find lessons in every little thing in life. It is simply about aligning our perspective; the key is how we decide to look at it. As a result, we discovered that the festival of colours is not only culturally significant but also teaches us important financial lessons. These teachings can be applied in our daily lives to help us relieve from financial stress.

However, one can easily comprehend the above-mentioned financial lessons if you are financially literate. Financial literacy aims to assist you in better comprehending the intricacies of financial planning, saving, and investing. It is a life skill that you must grasp to maintain sound financial well-being. Financial literacy will help maintain a secure financial future, prevent financial mistakes, and become your own financial planner.

So, this Holi celebration, Gear up! Remember the financial lessons you can learn from the festival, which may help you enhance your financial well-being. May the colours of Holi make your investments flourish and keep your financial health in pink.

Happy Holi!

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Warm Regards,
Mitali Dhoke
Jr. Research Analyst