Small steps towards big money - How to start your financial life anew this Diwali

As Diwali draws near, homes across India are being cleaned, decorated, and illuminated with promises and hopes of new beginnings. For many of us, festivals are not only a reason for celebration but a chance to sit with the family and reminisce and reflect. We make promises to exchange old habits for new ones and hope that the bright light of the diyas guide us to a prosperous and a kind future. But amidst the hustle of exchanging pleasantries, buying gifts, stocking up on sweets, and many more future plans; one plan that usually gets overlooked is our financial health.

This Diwali, as we pray for a renewed lease on life, why not also strive for a fresh start in our financial health? It’s not about any radical or sudden changes, but just a small step. Because the prospect of buying a house for your beautifully envisioned future seems a lot less daunting when you know you have already finished taking your baby steps. In a world where instant gratification is the new normal, we tend to forget the road to wealth isn’t a sprint; but a marathon. And like every daunting marathon, this too, starts with the first step.

Why Diwali? Why now?

Well, there’s a saying by Kabir Das, “kal kare so aaj kar, aaj kare so ab, pal mein pralaye ho gayi, toh bahuri karoge kab” which essentially translates as, “finish tomorrow’s tasks today, today’s tasks now, because if your moment is lost, how will you ever finish your work?”. This doha does nothing but emphasize that life is uncertain, and so, on the day that symbolizes the victory of light over darkness, isn’t it only right that we leave behind bad financial habits that don’t serve us well? May our homes cluttered with unpaid bills, accumulated debts, impulse purchases and missed investment opportunities be swept away with mindful planning!

So, the question remains is how? Where to begin? What is even the first step on this rocky road to a future we have all envisioned for ourselves? How do we know we are on the right path? Now, if you’ve managed to read till here, it already means you are interested in finally working towards that resolution you make at the beginning of every year but never get round to working on! 

The Power Of Small Steps

First, let’s throw away the myth that building “big money” is only for the rich. Everyone can achieve financial freedom, however different the journey may look like. But it always begins with a series of small, deliberate choices made consistently. 

One of the most empowering steps is setting clear, achievable financial goals. During Diwali, we often make elaborate plans for the year ahead—festivals, family gatherings, and even vacations. Why not extend that planning to our finances? Whether you aim to save more, invest for the future, or clear that nagging credit card debt, clarity is key. When your goals are clear, even modest steps begin to add up.

Budget Like You Mean It

This Diwali, create a spending plan that lets you enjoy the festivities without derailing your finances. 

1. Track your Festive Expenses: Start by setting clear limits for key categories like gifts, décor, and entertainment—say ₹5,000 for gifts, ₹3,000 for new festive clothes, and ₹2,000 for outings. To stay within these limits, consider using separate envelopes or specific budget caps for each category. Once you hit your spending limit, pause and ask yourself if more is truly essential. 

2. Keep Room for Savings: To balance indulgence with savings, try a “splurge-match” approach: for every Diwali purchase, put 10% of that amount into a savings account. This way, you can enjoy the festivities and still grow your savings a little each time you spend.

Investing: Beyond Traditional Gold Purchases

While buying gold has been a Diwali tradition for centuries, consider diversifying your approach this year to make your money work harder.

1. Mutual Funds for Beginners: Instead of a gold bangle, put aside ₹5,000 in an equity mutual fund SIP. It’s an accessible, automated way to build wealth over time, requiring just a monthly commitment.

2. Exchange-Traded Funds (ETFs): If you want to stay linked to gold but not buy jewelry, consider gold ETFs. These allow you to invest in gold with a lower cost and often with better returns than physical gold.

Debt Control: Clearing the Path Forward

This Diwali, consider “decluttering” your finances by tackling outstanding debts. Here’s how to get specific with debt repayment:

1. Prioritize High-Interest Debts: Prioritize high-interest debts, starting with credit cards and personal loans, as these can quickly accumulate interest. Set aside an extra amount each month, no matter how small, specifically for these payments. Gradually reducing high-interest debt frees up funds, saves on interest, and moves you closer to financial freedom.

2. Pay Down a Small Debt Completely: Paying off one smaller loan or credit card balance in full can give you a morale boost and free up income to tackle other obligations.Freeing yourself from debt is like sweeping away the cobwebs, giving you a clear path to build wealth.

Protection: Safeguarding Your Future

Think of insurance and emergency funds as the security locks on your financial house. This Diwali, take a close look at your coverage.

1. Review Your Health and Life Insurance: Are you and your family adequately covered? A term life insurance policy provides a larger sum insured at a lower premium, ideal for young earners with dependents. Adequate insurance safeguards your finances and provides peace of mind in case of emergencies.

2. Emergency Fund for True Emergencies: Set aside at least ₹20,000 to ₹50,000 in a separate savings account. Even if you start small, making this a priority helps ensure that you’re prepared for unexpected expenses without disrupting your day-to-day finances.

Insurance and an emergency fund serve as buffers that protect both your savings and future financial goals.

Here’s to a prosperous Diwali, filled with not just joy and laughter, but also the promise of financial well-being. The best time to start is now!