This Festive Season, Embark on A New Journey Towards Financial Independence

Published On: 29-Oct-2020

While the social distancing norms have kept the people away from the markets in this festive season, Covid-19 has been unable to lower the festive excitement. Digital being the new normal, people are now getting accustomed to digital shopping. However, one should not go overboard with their festive spending and stay prudent with their financial plans.

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 Here are five simple financial lessons investors should remember to embark on their journey towards financial independence:

1. Stay debt-free

The high discounts offered by online retailers during the festive season attract the non-buyers to purchase different products just because the product is being offered at a lower price. While this means savings for those who were planning to buy such products, it also means additional expenditure if the only reason to buy that product is the discount it is carrying. 

From no-cost EMIs to credit card discount offers, the plastic money often makes it more convenient to splurge. One should be careful about overusing their credit cards to stay debt-free to the extent possible. Being in debt is the primary speed-breaker in the investment journey towards financial independence. 

2. Recoup emergency fund 

During the lockdown, the reduced economic activity resulted in several people using their emergency fund corpus to sustain their lifestyle and EMIs. Such times proved the benefits of having an emergency fund to the investors, providing a financial cushion during contingencies. As the economic activities get back to pre-Covid levels, one should make all the efforts towards recouping their emergency funds. 

One can maintain such a corpus in liquid funds and overnight funds, which allows almost similar liquidity like in the regular bank accounts but equipping the investors with the potential of better returns.  

3. Budget for festive investing 

With the celebrations of Dussehra, Durga Puja, Diwali, Dhanteras around the corner, people must continue to budget for their festive spending out of their incomes. Staying unplanned towards the routine expenses may derail the investment journey. One can even combine their festive spending with their financial plans. 

For example, one can consider diversifying their portfolio with Gold ETFs, gold funds, etc. when they plan to make their auspicious Dhanteras gold purchasing, instead of going for physical gold. 

4.  Don't stop SIPs 

Staying diversified across asset classes is crucial for a pleasant investment experience. Different asset classes tend to perform as per their respective economic cycles, and no single asset class has been outperforming consistently. When one asset class underperforms, other asset classes may compensate for such underperformance. 

The continuing volatility in the equity markets and recent outperformance of the gold as an asset class may outweigh the rational investing plans and cloud the investors with recency bias to be underweight on equities and overweight on gold. Even while the markets are currently in the consolidation phase, the long-term growth story of the Indian economy continues to stay intact. As such, the investors mustn't discontinue their equity investments or redeem their existing investments.

5. Periodic review for sleeping investments 

One should review their investment portfolio to identify the underperforming schemes and take corrective actions to replace such schemes with better performing schemes. However, the review should be based on the schemes' long-term performance across the market cycles instead of short-term performance. A periodic review of the investments and financial plans also allows the investors to measure the achievement towards financial goals objectively and adjust the financial plans suitably for any changes. 

With the festive celebrations already in the air, the investors must stay physically and financially healthy. Prudent money management can be helpful in a pleasant investment journey towards financial independence. Stay prudent and take the right steps forward.