How to enjoy the festival season without breaking your budget? Experts weigh in

The festive season in India is a time of joy, tradition, and togetherness, but it also brings with it the temptation to overspend. If celebrations are not planned wisely, the happiness of Diwali, Christmas, etc, can turn into financial worries that last much longer than the season itself.

Experts advise us on how to go about the optimum mix of both enjoying and saving hand-in-hand.

“The best way to avoid debt is to park your money ahead. When you set aside funds in advance, whether through monthly savings or by using a portion of your bonus, you walk into the festive season with confidence and peace of mind. Celebrating with money already saved feels far more joyful than celebrating on borrowed money,” says Chirag Muni, Executive Director, Anand Rathi Wealth Limited.

“A good place to begin is with a festive budget envelope”, says CA Vishnu Agrawal. Determine in advance how much you can spend — and don't go over it.

Break this envelope into tidy heads: gifts, travel, décor, and charity. When the limit is exhausted, don't be tempted to "borrow from tomorrow." Festive bargains come around annually; the resulting debt can last a great deal longer.

Then, match indulgence with investment. For each large discretionary buy, make an equivalent financial action — SIP top-up, small loan prepayment, or top-up of your emergency fund. “This induces the habit of simultaneous saving, making consumption a conscious act instead of a habit,” says Agrawal.

“Financial prudence during festive extravagances demands adequate planning,” says Mukesh Pandey, Director of Rupyaa Paisa. Plan a festival budget in advance and adhere to it; set aside a specific percentage of your bonus (e.g., 50%) towards savings/investment before you indulge; ask yourself before buying, whether this creates permanent value or just eases emotional desire. Keep in mind that long-term wealth, not short-term pleasure, is your real wealth.

Also, don’t forget your taxes. Experts suggest both a knowledge of tax laws as well as a tax strategy to navigate you through these (financially) bountiful and challenging times.

“From a tax perspective, there are some provisions that tend to go unnoticed during festival gifting,” says Pavi Pratap, Director of Shankar Fininvest. Cash gifts from relatives are completely exempt without any limit, whereas gifts from non-relatives are exempt up to ₹50,000 in a financial year. Above that limit, they are chargeable as "income from other sources."

There is also a total exemption for gifts received on some special occasions—e.g., marriage—but festivals like Diwali or Holi don't get that privilege.

On festive occasions, employers give vouchers or gift hampers; these are tax-free up to ₹5,000 in value in a financial year, but anything over that gets treated as a taxable perquisite.

Most taxpayers also overlook the fact that gifts given during festivals, for instance, to religious or charitable organizations, can be deductible under Section 80G, subject to guidelines. “The trick lies in deliberately framing gifting and donations, considering both exemptions and also reporting requirements,” explains Pratap.

By the way, if you are on a holiday for the festive season, please do not assume that the rating agencies that are monitoring your loans, repayments, EMIs, etc, are on a holiday too. They are hard on the job and ready to catch your possible slippages.

“If there is any impression that rating agencies offering leeway during festival times, no, their evaluations don't relax,” says Pandey. Credit ratings, loan evaluations, and similar agencies work on finance and macroeconomic data, not calendar months. It's Business as usual for them.

Often, emotions drive money decisions during festivities. Big discounts and flash sales can tempt us to overspend or take on debt we don’t really need.

“A good practice is to shop with a clear shopping list, set a spending cap, and avoid buying just to ‘earn’ reward points on your credit card,” says Rajeev Gupta, Head- eGovernance and Third Party Products, Religare Broking. Think of it this way—celebrating within your means today ensures you don’t have repayment worries tomorrow. If you can balance indulgence with a little saving—whether through SIPs, gold, or an emergency fund—you’ll enjoy the festivals twice over: once now, and again when your finances stay intact.

Banks and financial institutions often sweeten their offers during the festive season. Credit and debit cards come with cashback schemes and e-commerce discounts, while lenders sometimes reduce interest rates, waive processing fees, or offer no-cost EMI options. These can add value for planned purchases, but the risk lies in spending more than necessary simply because the offers appear attractive. “Ideally, festive incentives should be treated as a small saving on what you intended to buy anyway, not a reason to stretch your finances,” suggests Muni.

“By avoiding reckless investments, using bonuses wisely, being aware of tax regulations, being able to distinguish festive offers, and maintaining self-discipline, a middle-class household can enjoy without wrecking its financial future,” says Pandey.

Use your bonus for peace of mind, not the shopkeeper's benefit

The big issue is your bonus. Now here, naturally, the tendency would be to just spend this and enjoy, correct? This spending at one go is exactly what experts caution against.

“A festive bonus can feel like windfall money, but how you use it can make a big difference,” says Gupta, Head- eGovernance and Third Party Products, Religare Broking. The first priority should always be clearing high-cost debt—especially credit card dues (36-48% interest) or personal loans (10-18% interest)—because the interest outgo can erode wealth far quicker than any investment can grow it.

In fact, prepaying a loan is often more rewarding than chasing a high-return investment, simply because reducing liabilities gives a guaranteed return equal to the interest saved, and it also brings along peace of mind.

Once urgent liabilities are under control, use the bonus for strengthening your long-term goals, e.g. enhance your protection with term & health insurance, topping up investments – MF SIPs and spreading it across asset classes - equity, fixed income, and even digital gold, while maintaining your allocation basis your risk profile.

“In short, treat your bonus not just as a celebration fund, but as a building block for financial resilience. Done right, it can give you both immediate relief and future security,” says Gupta.

“The most effective way to use a bonus is to align it with your financial priorities,” says Muni. If you have high-interest loans, especially those above 10%, clearing them should be the first step.

For long-term goals, an 80:20 mix of equity and debt can generate average returns of around 12 to 13% over time. Medium-term goals of 1 to 3 years are better served with a 70:30 mix, while less than a year calls for safe options like liquid, debt mutual funds, or arbitrage funds or FDs, which preserve capital while still giving reasonable returns.

Source: Anand Rathi Private Wealth

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.

Manik Kumar Malakar is a personal finance writer.