Diwali, the festival of lights, celebrates the triumph of Lord Rama’s return after an eventful victory over Ravana. Goddess Laxmi, the deity of wealth, is also worshipped during this festivity. Being the most famous festival of India, celebrations are carried out with grandeur and splendour all across India. Diwali calls for family gatherings, traditional rituals, the sharing of gifts with loved ones, indulgence in sweets, and much more.
One common practice that is observed during the preparation of Diwali is the cleansing of homes. What a pleasant way to enter an auspicious period of prosperity! We must impart this simple act of cleansing and its significance in our lives financial facet.
As we approach this auspicious festival of lights, let us also heed our unfavorable money habits that no longer serve a purpose; instead, embrace these four financial habits that may prove profitable.
1. Setting Financial Goals
It is essential to ask yourself, ‘what does Financial Freedom mean to you?’
It could be having more than enough savings in your account or being debt-free, or having a secured retirement plan in place. Fundamentally it means to be in control of your money.
Once you have your answers, list them down and set them into SMART goals – Specific, Measurable, Achievable, Relevant, and Time-bound.
– Pay off Rs.2 lakhs debt in 10 months – Invest Rs.5,00,000 in your Retirement fund – Add Rs.5000 weekly to your investment portfolio
Such realistic and time-bound goals provide clarity and focus besides speeding up the process. Financial goals can be big or small. What’s important is to have them and start working on them.
2. Creating a Budget
When you have a clear idea about your cash inflows and outflows, you are in a better position to manage and grow your finances. Drafting a budget is so rewarding, as you are well aware of your income and expenses on a weekly or monthly basis. Budgeting can help you significantly cut down on needless expenses, thus allowing more savings or investments. Following a 50/30/20 rule, you employ 50% towards your monthly expenditures, 30% into your savings, and 20% towards wants & lifestyle expenses. These wise money habits go a long way in building a corpus and ultimately in wealth creation.
3. Having an Organized Investment Plan
Now that you have your monthly budget in place, organizing your investment plans should be a wise and effortless step to take. It may seem overwhelming and confusing for a beginner to choose the right investment vehicle, especially when the market is flooded with competitive and alluring investment opportunities. Prudence lies in trying not to mirror your peers, family, friends, or neighbors while selecting investment plans. Your financial requirements and goals are different from theirs. So don’t shy away from asking for expert help. It would be advisable to seek a fee-based financial planner/consultant who can formulate the best investment plan for you after considering your income and risk appetite. Mutual funds, SIPs, equity, and debt funds are some investment options to consider that can best suit your financial goals.
4. Building an Emergency fund
The importance of maintaining an emergency fund can’t be stressed enough and is arguably one of the paramount habits to be followed. Emergencies can come knocking at your door unannounced at any given time. Be it your child’s education fee hike, an unexpected substantial medical bill, a job loss, or even your pet’s unpredicted surgery. And if you are not ready with extra savings to deal with such a crisis, it can simply add to the burden of your current worries. Maintaining a contingency fund can save you from the hassle of borrowing funds from family and friends, applying for a personal loan, or chipping from your credit card only to pay back with mounting interest.
As a rule of thumb, setting aside six months of living expenses, including EMIs, can cover up your emergency fund.
As the Diwali lights brighten up your homes with joy, hope, happiness, and new beginnings may be embracing these virtuous money habits bring financial prosperity to your life too.