Besides, not all can bank on Diwali bonuses to finance festive expenses, except for a few, like those employed in the manufacturing sector.
These sectors usually give one month's or even half a month's basic salary as bonus during Diwali, which they adjust with the annual bonus at the conclusion of year.
For example, say you are supposed to obtain Rs 10, 000 as annual bonus and you obtain Rs 1, 000 at Diwali. At the end from the year, you will get the remaining amount (Rs 9, 000) because your annual bonus.
For the rest, the option would be to liquidate existing investments or take fresh liabilities. Financial organizers clearly favour the former.
Their reason: Investments can continually be built again. Opting for loans means an additional debt burden that may derail your other finances. Also, festive expenses are discretionary expenses and may easily be curtailed.
While choosing instruments to liquidate, avoid those associated with specific goals like retirement or children's education.
"You may, instead, liquidate any ad hoc or wrong investments, inch says Sadique Neelgund, a certified financial planner. An example of random investments would be mutual fund investments made only with regard to tax planning purposes (assuming the three-year lock-in period may be crossed).
Similarly, say you have bought multiple unit-linked insurance coverage and don't need all. You could surrender one or even more plans (again assuming the three-year lock-in period is over) and make use of the surrender amount for funding your expenses. Be careful, although, as it may take at least 15-30 days to obtain your funds.
Alternatively, you can break your fixed debris (FDs), if any, to tide over the temporary money crunch. There will be a penalty, though, in situation of premature withdrawal.
Loans are a strict no-no, as the interest payable could be 18-22 per cent for personal loans or 38-40 per cent in the event of credit cards (revolving credit). Even gold loans may attract 14-15 percent interest.
The fund requirement for festive expenses is usually not that large, except if you are buying precious metal or, maybe, consumer durables.
For purchasing consumer durables, rather than taking loans, you can explore the interest equated month-to-month instalment (EMI) option. You may have to pay two-three EMIs upfront as deposit, and some small amount as a processing fee.
For gold, given the high price of the metal (Rs twenty six, 000 for 10g, you are better advised to hold off the purchase, unless absolutely necessary.
Finally, the best and also the cheapest way of raising cash this festive season might be borrowing from family. As Arnav Pandya, certified financial adviser says, "Borrowing money from family is interest-free, too. inch.
Source : Rediff