It’s around that time of the year when we ignore all our financial worries and go on a shopping spree. Yes, the festive season has begun and right from wearing new clothes, eating at a new restaurant or going on a holiday, it is easy to get caught in the euphoric mood. And with so many websites offering attractive deals and discounts, your clients too could fail to resist the temptation and end up splurging.
However, many a time clients feel the pressure to meet the expectations from family of buying expensive gifts and this can affect their finances. For example, suppose your client confides you that her cash flow situation is not good but she still wants to spend more? This may not be an isolated case. More and more Indians like to buy now and pay later, not quite realising that such borrowings could impact their finances severely later.
Also, many employees get bonuses during festivals. So a majority of us like to spend this bonus rather than save it for future. This is where a financial planner has to play an important role to help their clients spend prudently.
So how can you help your clients spend wisely this festive season? Here are a few tips that may help you:
Help them prepare a budget: While you may have made financial plans to help clients achieve their long term goals you would do well to prepare a ‘festive budget’ for your client. “Festivals means connecting with our family and friends. We go with our emotions rather than logic. Preparing a budget can help investors keep track of their investments which will allow them to focus on their needs,” says Suresh Sadagopan of Ladder7 Advisories.
“We generally prepare a different budget to fulfil festival requirements. If we have set Rs. 50, 000 as festival budget, we make it mandatory for our clients not to breach this limit,” adds Suresh.
Help them use their bonus effectively: For many, festival season also brings in bonuses. But very rarely do we use this bonus smartly. To help clients use bonus prudently, you should help them to identify the right priorities and use the bonus only in accordance with that. For instance, if your client is receiving a Diwali bonus, then you can help them determine how they can use this additional income sensibly. They can use some part to prepay their EMIs or allocate some money towards a contingency fund. Apart from this, you can also help set aside a part of it for festival purchases or for a vacation.
Help them set their expectations right: Whether it is an HNI or a retail client, various studies have revealed that investors always prefer spending over investing. Also, often while expressing our love for the family, we tend to go overboard to give them expensive gifts. “Our lives revolve around our families. Whatever we do is to make them happy but this does not mean that we should go beyond our means. One has to be financially disciplined and to do this it is not necessary to shower your love only through costly gifts. Making proper investments or buying an insurance cover can also add value to a family’s wellbeing,” says Nikhil Kothari of Etica Wealth Management.
Don’t get lured by discounts and sale: Ecommerce websites are showering huge festive discounts which may make us buy more than what we really need. Similarly, when we go out in a mall to buy something specific, we often end up buying other things even if they are not on our buying list.
“We recommend them to shop only for the things which they need. For instance, if my client has bought a cell phone last year, I do not allow them to buy again this year even if they wish to. We have to be strict with their spending,” advises Suresh.
The festive season brings in joy, celebration and prosperity. It is a time when we can enliven our personal lives. A regular check on the finances can help them enjoy this festive season with no worries.