Here Are 7 Financial Lessons You Must Learn This Makar Sankranti

Celebrations this year will be more reserved following the social distancing restrictions due to the looming threat of the Delta plus Omicron variant that has led to a rapid surge of COVID-19 cases in India. Nevertheless, let us celebrate Makar Sankranti in a unique way by imbibing financial lessons that will improve your financial wellbeing and protect your financial future.

Just like other festivals, it is celebrated with great enthusiasm in various parts of India. In Maharashtra, "Til Gul" (a sweet made of sesame seeds and jaggery) is prepared at homes to mark the harvest of the sugarcane crop out of which jaggery is made. In Gujarat, Makar Sankranti is referred to as Uttarayan, and kites are flown to wake the Gods from their winter slumber to bless their harvest. The Makar Sankranti celebration includes various activities such as Bonfires, Surya Puja in rivers, etc.; amongst these, flying kites is a very popular celebration activity. The International Kite Festival (Uttarayan) is one of the biggest festivals celebrated in Gujarat on the occasion of Makar Sankranti.

I have observed that the popular Makar Sankranti kite-flying activity teaches us a few important financial lessons about managing our finances. One perspective is that managing your finances is like flying a kite to scale up your financial well-being.

To fly a kite high in the sky demands preparing the kite with a strong string, knowing the direction of the wind, meticulous efforts to hold the kite against the wind flow, focus, and an effective technique to fly higher than other kites and protect your string from being cut. The kite-flying process can teach you some valuable financial lessons that you can use to have a better control over your finances.

Here are some financial lessons that you can learn this Makar Sankranti to elevate your financial wellbeing high up in the sky like a kite:

1. Keep an eye on your kite - Define S.M.A.R.T. financial goals

When you are flying a kite, the most important thing is that your kite must have a good aerodynamic shape in order to lift off effectively. You always need to keep an eye on it, set a target to fly high up in the air, and do not lose the sight of the direction it is flying in.

Similarly, while managing your finances, it is crucial to set S.M.A.R.T. financial goals that are both short term and long term in an effective manner. You must ensure that your investments are aligned to your financial goals so that you reach your goals in the desired time. In case of any uncertain events, modify your financial goals if required considering the changes in your financial circumstances.

2. Be ready for flight - Create a financial plan

As you prepare for your kite to take a flight, you must check the flow of the wind and if the 'manjha' string is strong to lift off the kite based on the wind direction. It is a step-by-step process that requires effective planning in order for your kite to take off. This approach emphasises the value of of creating a financial plan for improved financial control and a wealthy corpus for a secure financial future.

Financial planning is a crucial task because it helps you manage your finances in a systematic manner. It assists you in tracking your income, expenses, and investments. Your financial plan must include goal setting, managing debt, investment planning, portfolio review, etc. The most effective way to begin planning is with a budgeting exercise. This will offer you an overview of your cashflows and how you can allocate a specific amount for saving and investment purposes. Construct a robust financial plan for yourself that accumulates assets and generates a steady flow of income.

3. Keep a spool handy (Firki/Chakri) - Maintain an emergency fund

In a typical Makar Sankranti festival, we have often seen people on terraces where one manoeuvres the kite while another is standing beside the kite-flyer holding a Firki/Charkhi. The spool is used to store the excess thread used to fly the kite, and its sole purpose is to release and retract the correct amount of string at multiple instances in order to propel the kite higher. The financial lesson here is, just as the spool helps you balance the kite against wind currents, setting up an emergency fund provides you with financial support in challenging times and does not hamper your financial health.

Maintain an emergency fund so that you can be prepared for any financial exigency or loss (like the uncertainties amid pandemic). In other words, it is crucial to set money aside in a savings account for an emergency fund, as it will help you sustain any unforeseen event and keep your financial stability intact. Ideally, this contingency fund should be sufficient to cover expenses for 18-24 months, with monthly expenses including EMIs.

4. Learn how to control the "manjha" - Develop financial discipline

Flying kites need utmost focus and determination. You need to learn the discipline of controlling the string of the kite appropriately to avoid anyone from cutting your kite or loosing it against the wind. You need to understand when to release and when you should retract the string to keep the kite steady and soar higher. The art of controlling the string of the kite teaches us a financial lesson to instil financial discipline that will help you have a better control on your finances and secure your financial future.

Similarly, to enhance your wealth creation journey you must maintain financial discipline, stay focused, and be patient with your investments during minor turbulences in the markets. Learn to control and overcome greed and fear, avoid any behavioural biases. In order to maintain financial discipline, you need to spend frugally, practise delayed gratification, save and invest regularly, review your portfolio timely, and develop immunity against market noise and nuances.

5. Fly in the right direction - Invest in worthy investment avenues

If you hold a kite in the right direction, it can take off effortlessly even in the slightest breeze. You simply need to assess the wind direction and aim your kite in the right direction and ensure the length of the string is proportionate to how high you want to fly it. This teaches us the financial lesson of investing in profitable investment instruments with proper asset allocation and diversification, which aids in wealth creation and the formation of robust investment portfolio.

It is critical to save and invest your hard-earned money in worthy investment opportunities and take informed financial decisions. Always account for the impact of inflation on your investments, and invest wisely in worthy investment avenues. Most importantly, assess your risk appetite, investment horizon and align your investments with your financial goals. Investing in worthwhile investment avenues that can produce optimal risk-adjusted long-term returns.

However, the equity market is volatile in nature and any uncertain events may create a turbulence in your portfolio. Hence, you must allocate your investments under an 'all-weather' portfolio that can tide over market phases. This way, you will be able to attain your financial goals while also surviving the gusty wind of uncertainty.

6. Stay protected - Purchase an insurance cover

While flying the kite, you need to protect your fingers with medical tape / bandages because the 'manjha' is an abrasive string coated with powdered glass that provides the quintessential strength in flying kite combats. Thus, to avoid 'manjha'-related injuries, you should use medi-tapes and bandages to protect your fingertips.

Similarly, you should insure yourself against threats to your financial future by purchasing proper insurance cover. With the increased risk to an individual's life and health as a result of pandemic uncertainty, it is critical that you obtain adequate insurance coverage. An adequate life and health insurance cover will help your family to fulfil their financial requirements in your absence.

Lack of insurance may create financial hardship in times of emergencies, be wise and stay protected by putting an insurance plan in place and be prepared for any uncertain event or medical emergencies. If you already have insurance cover, consider to review your policy with your agent to make sure you are optimally insured.

7. Be flexible 'dheel de' and 'Kai po che' - Review and rebalance your portfolio periodically

You should always be prepared to make adjustments as the situation demands. While flying kites, people shout out 'dheel de!' to their companions. It means when you are in the midst of a strong gust of wind, you have to let go the string off and adapt to the situation. You must assess the scenario while keeping a watch on your kite's movements and react accordingly. This resembles the financial lesson of reviewing and rebalancing your portfolio periodically.

When it comes to an investment climate, there are various market phases your investments go through. You see, with changes in economic activities and market conditions, the portfolio performance may fluctuate, and thus your investments need to be reviewed timely. It is essential to analyse the underperforming assets on various quantitative and qualitative parameters.

Keep an eye out for any threat that can cut (Kai po che) your kite or destabilise its flight course. Periodic portfolio reviews will ensure to eliminate the non-performers that weakens the performance of your portfolio and you will avoid falling prey to emotional biases when eliminating the underperforming assets. If you want to maintain a robust investment portfolio that survives through the thick and thin of volatile markets and macro-economic conditions, a certain degree of flexibility and adaptability is advisable.

Remember to review your portfolio periodically and continue looking for better opportunities to efficiently adjust your portfolio. If necessary, you may rebalance your portfolio and invest in an alternative investment instrument that offers better risk-adjusted returns.

To conclude...

Kite flying is considered to be an invigorating sport, no matter how potentially well-designed the kite is aerodynamically, if you lack the knowledge to follow the effective technique and balance your kite high up in the air, it is at risk and won't be able to soar higher above the competition.

Similarly, if you want your kite of financial wellbeing to reach new heights, you must empower yourself with adequate financial knowledge to keep your string (finances) under control. Financial knowledge will assist you to understand these financial lessons and implement them to secure your financial future. Makar Sankranti is a beginning of new harvest season; in the same way you can sow the seeds of wealth creation by improving your financial knowledge.

So now that you are armed with these valuable financial lessons on Makar Sankranti, go ahead and fly those kites of your financial wellbeing high up in the sky!

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Happy Makar Sankranti!

Warm Regards,
Mitali Dhoke
Jr. Research Analyst

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