As India lights up for the festive season, the air is thick with excitement. While the festive period is essential for cultural and emotional connection, financial exuberance often leads to a severe post-celebration strain. With households poised to spend record amounts this year, the temptation to indulge is high, but so are the financial pitfalls that can derail long-term financial health. The key to a stress-free celebration is understanding the traps and planning a defence.
In the excitement of Diwali, Christmas and New Year’s, people often focus solely on the joy of the moment and forget the financial consequences of overspending. January brings a series of unavoidable expenses such as school fees for the new academic year, annual insurance premiums, and credit card bills for all the holiday spending. Any oversight can leave budgets stretched and savings depleted.
The result is a stressful financial period that undermines the fresh start associated with the new year. The pressure to pay these bills may lead to borrowing, and delayed or missed payments.
FOMO leads to overspending
Festive sales on e-commerce platforms have become national events, drawing millions into a spending frenzy fuelled by deep discounts and digital convenience. With urban buyers flocking to these platforms in unprecedented numbers, the surge in online shopping creates an illusion of savings that often masks overspending.
The real trap lies in how these platforms exploit people’s urgency and fear or missing out (FOMO). Psychological pressure points are designed to nudge you into buying what you may not need, often at prices that aren’t the bargains they seem. The ‘limited-time offer’ creates an illusion of scarcity, pushing rational buyers into impulsive decisions that stretch budgets beyond comfort.
At times, even price comparisons between platforms can be misleading as so-called ‘mark-downs’ might be from inflated base prices. By the end of the festive period, many end up owning things that add clutter rather than value, and the true cost appears only when the credit card statement arrives at the end of the month.
Hidden cost of ‘buy now, pay later’
Big-ticket purchases are earier to bear when split into equated monthly installments (EMIs). No-cost and low-cost EMI schemes now cover everything from gadgets to home appliances. However, this convenience makes is easier to overspend and includes hidden costs.
What starts as a manageable ₹2,000 monthly payment for a smartphone quickly becomes an overwhelming debt when combined with EMIs for a laptop, washing machine, and other items bought during the same festive rush.
While marketed as ‘no-cost’, these schemes frequently involve hidden costs such as processing fees, GST, and the loss of upfront discounts, which quietly inflate the total cost.
EMIs dull the immediate pain of payment, making expensive purchases feel routine. The burden, however, lingers long after the celebrations fade, constraining your future financial flexibility.
Never liquidate investments to shop
Perhaps the single most damaging financial decision during the festive season is liquidating long-term investments to fund short-term celebrations or purchases. Every year, many individuals cash out equity mutual funds, stocks, or fixed deposits for this.
Cashing out early destroys the compounding effect that builds wealth over time. The opportunity cost of selling an investment that could have grown 12% annually to buy items that depreciate immediately represents a double loss: the money you spend now, plus the future returns you sacrifice. This shift from ‘accumulating’ to ‘spending’ often incurs a tax penalty. For example, equity investments held for less than a year attract 20% short-term capital gains tax, plus surcharge and cess.
How to avoid these pitfalls
- Set a spending limit: Decide your total festive budget before sales begin and break it down by category such as gifts, food, clothes, electronics. Track every expense to stay within bounds.
- Wait before making big purchases: For any non-essential item above ₹10,000-15,000 wait 30 days before making a decision. The urge to buy often passes, saving you from impulse purchasing.
- Keep EMIs in check: Limit combined EMI obligations to 25% of your net income. Before committing, ask yourself: would I buy this if I had to pay the full amount today? If not, walk away.
- Protect your investments: Never liquidate long-term assets for festive shopping. Instead, build a separate festival fund through small monthly savings throughout the year.
- Focus on experiences: Direct your energy toward relationships and meaningful moments rather than expensive material purchases. The joy of festivals comes from togetherness, not price tags.
- Know your growth target: Every financial goal, such as buying a home, funding education, or securing your retirement requires your investments to grow at a specific minimum rate. Festive overspending doesn’t just drain money today, it forces you to earn higher returns tomorrow to compensate for lost time and compounding. Understanding the growth rate your goals demand helps you understand the true future cost of splurging today.
The smartest families use festivals to strengthen their financial foundation, not weaken it. Automate your savings, review your insurance, and redirect bonuses into SIPs or recurring deposits. This season, celebrate wholeheartedly, but let financial wisdom guide your choices.
Ashish Khetan is a founder at Serenity Wealth, and Tanya Singh is a founding member.
