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Home >Money >Calculators >5 mistakes to avoid this festive season

Madhusree Sarkar, 24, works with an audit firm in Mumbai, and plans to go on a shopping spree this festival season. Sarkar started working in July this year and wants to buy gifts for her family. “This will be my first trip to my home town, Silliguri, after I started working. I have to buy clothes and gifts for everyone," said Sarkar. She plans to spend her entire salary this time and has already bought a mobile phone for herself. This is certainly the time to pamper yourself and your near and dear ones, but don’t overdo it. Here’s what not to do.

Walking through shopping malls or browsing through e-commerce sites with an aim of clinching the best deals can trap you into spending more. If you want to control your money, and not the other way round, make a list. “It may sound trivial but if armed with a shopping list, chances of impulsive buying come down significantly," said Suresh Sadagopan, a Mumbai-based financial planner. Jotting down what you want also helps you come to an estimate and plan your purchases. Once you have a list, try to stick to it.

Many salaried individuals get a bonus during this time of the year. Be careful of how it is spent. Banks are offering low interest rates, easy equated monthly instalments (EMIs), minimal paperwork, discounts and more. “Resist the urge to borrow and then spend, unless absolutely essential. Work for yourself rather than the banker," said Deepali Sen, founder, Srujan Financial Advisers LLP.

To avoid falling into a spending trap, try to create a budget for festival spending as part of your financial planning. “When you slot festival budget as a goal in your financial plan, it stays on the radar. It is also likely that meaningful things would be on the list, such as a washing machine replacement or painting the house, rather than frivolous purchases," said Sen.

With increasing competition in the marketplace, shopkeepers and e-commerce websites are offering products at competitive prices. Use comparison sites, or do the exercise yourself. To get the best prices online, you could use websites such as www.indiabookstore.net (for books), and www.mysmartprice.com (for all products).

“Remember that online and offline are just two modes of purchasing a product. Why do you want to pay extra if you are getting the same product at lesser cost? By carefully comparing prices, you will be able to identify the best deals," said Anil Rego, a Bangalore-based financial planner. Don’t buy a product blindly; do your research first.

We tend to spend more when using our credit cards. Why does this happen? “Credit cards mostly have limits higher than what we may need. It, therefore, encourages instant gratification. With an added advantage of deferred payment, it is a sure shot recipe of spending more than what you need," said Sen. Credit cards are simply another mode of payment, and come with a high penalty in case of delayed repayment. Use, but with care.

Talking about saving and investments at this point may look like a spoiler, but it is actually a good time since you have more money at hand. “Many Indian companies give bonuses and incentives during Diwali. If used prudently, this money could get your money life in order. For instance, you could consider pre-paying your loans by evaluating the outstanding amount," said Sen.

If you don’t have any loans, you could start investing in suitable products. “You could also first invest a portion of your bonus and then spend the rest. If you give investing priority, and shift money towards it, you’ll have less to spend, thereby limiting unnecessary expenditure," said Sen.

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