Important Financial Lessons which Diwali Teaches Us

Diwali is the festival of lights that also teaches many financial lessons. Some of the lessons include planning for one’s financial security, investing in a diversified portfolio for different rewards, avoiding mishaps while celebrating, etc.

Diwali is just around the corner and you will be busy buying gifts and ensuring that you avoid mishaps while you are having fun. How often have you thought that in order to live stress free, you have to plan and ensure that you are insured and are ready to meet any financial burden in the future with ease? You can take the following takeaways from this festive season and implement them in your life at the earliest:

  • Plan for your future:

    Indians love Diwali and they don’t hold back on spending on gifts, clothes, vehicles and jewellery during the festival time. They plan on financing the expenditure that they will have during the festival time. You can use the same planning and enthusiasm with regard to your finances and start investing at a higher premium and enjoy the compounding benefits. The earlier you start to invest, the more you can avail through the compound interest. If you have invested Rs.1 lakh today and are earning a 8% interest on it which is compounded, at the end of 20 years you will be getting Rs.4,66,095 in return. If you invest the same amount at the same interest rate 10 years from today, you will yield Rs.2,15,892. The difference in the two figures is Rs.2,50,203 and it is the amount that you are losing out on.

  • Protect yourself:

    When you are bursting the crackers, your parents ensure that you are wearing clothes that don’t easily catch fire and follow precautions to avoid any mishap. Likewise, you must adopt the same caution with regard to insurance related matters. If you are buying a health insurance when you are young and are not suffering from major ailments, it is cost effective and the premium payments will be lower and you will be offered a comprehensive coverage. But that will not be the case if you are buying a health insurance at a future date and when you have health related issues, the lenders will charge a high premium for not so comprehensive coverage. Buy health insurance when you don’t want it as you may not get it when you really need it.

    Life insurance on the other hand is more rewarding when taken at an earlier stage of life. The necessity of life insurance is high during the ages of 25-40 years as you won’t be having enough savings to meet all your requirements. In the event you die, the insurance money will make sure that the family’s financial needs are met. The premium you pay towards life insurance depends on the entry age. You can enjoy the if you take the insurance policy at a young age.

  • Invest based on your goals:

    During Diwali, you buy gifts to your loved ones based on their preference, age and other factors. Similarly, you must start investing in a way to meet your future goals like that of your wedding, buying a house, children’s education, retirement, etc. When you have decided on a goal, you can start investing from an earlier stage to meet those goals. The goals ensures that you have cash flow during that time in the future. It never really hurts to have more money than to have a deficit in the finances.

  • Reward yourself with variety:

    Don’t you enjoy the variety that the Diwali celebration offers to you? You have the sweets, firecrackers, clothes, gifts, etc. You can enjoy the variety in the similar fashion by diversifying your portfolio to avail the benefits of the various financial instruments. The diversified portfolio reduces the risk that you take. If you are taking too much risk in one area, the other area will be more rewarding and that will cover the risk that you are taking. Balance your portfolio and invest in products that has different levels of risks.

So, get out there, invest enjoy the rewards that you earn from compounding. Insure your health and life to be ready to meet any medical bills or to make sure that your family is not financially burdened if you die at any time. Reap the benefits of the diversified portfolio and plan for your future goals of marriage, owning a house, a car, your children’s education and retirement well in advance.

GST rate of 18% applicable for all financial services effective July 1, 2017.

Disclaimer: Premiums may vary depending upon factors like age, location and prevailing taxes/GST.

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