• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
BW Businessworld

Festival Of Lights And Financial Learnings

This Diwali, make it a resolution to keep yourself financially fit. It will automatically help you to manage your money proficiently. Here’s wishing you all a very happy & a safe Diwali!


The festival of light – Diwali is here!  It is that time of the year when we pray to the Goddess of Wealth to bless us with prosperity. I’m sure you will be busy shopping, buying gifts for dear ones and looking forward for the exciting time with your family and friends.

While we invoke the blessing to protect and grow our wealth, we should always remember that proper money management is very important for long-term wealth creation. To keep that in order, an important learning this Diwali will be to do a financial fitness check.

By financial fitness, I mean four core areas one should consider to efficiently grow your money.

Asset Allocation

It is always advisable to maintain a healthy mix between equity, debt, gold and real estate. Depending on your age the risk appetite and investment horizon will vary. Investors in their 20s are young and not burdened with big responsibilities and dependents. It is the right age to invest in equities to capitalise on the higher risk bearing capacity. In fact, you could invest a small portion in debt funds or traditional savings instruments.

At 30s, people have a career/profession and can continue with higher allocation in equities to meet their goals such as buying a house, car, etc. At 40s & 50s, the number of dependents, and commensurate expenses increase and the risk profile changes to moderate with a portfolio mix of debt, equity and cash. And as we slip closer to our 60s or the retirement stage, in the absence of regular income, investment should be only in relatively less risky options such as liquid funds.

Keeping your expenses in check

We often tend to go a little easy on our expenses during Diwali. Sure, it is a time for revelry, but that does not mean we let loose our purse strings without any planning! 

We recommend right now will be the good time to start reviewing your expenses. Ideally ensure that your expense ratio be in the range of 60% -75% of monthly income including the contribution for EMIs and insurance premiums. And most importantly that your savings ratio does not fall below 25%!


Before bursting crackers, we often advise kids to play safe and avoid mishaps. Use the same approach for your health or life insurance-related matters. It is equally essential to have adequate insurance cover to meet your requirement. Most of us make two common mistakes when it comes to buying life and health insurance;

* We don't act at the right time.

* When we realize that we have done a mistake we try to over-compensate by buying a higher insurance cover than what we actually require.

We believe that an adequate life insurance cover typically should be 15-20 times your annual income. A comprehensive medical insurance cover for the entire family is a must. 

Contingency fund

Everyone is typically recommended to have an emergency fund, equal to 6 months of your day-to-day expenses and committed payments like EMIs and insurance premiums. But people believe that, creating a contingency fund requires you to cut corners from your everyday expenses. Your approach need not be as harsh; all you need is sound planning! 

Figure out your wasteful expenditure and start by cutting that out.  Begin small and determined. Every time you save money by cutting down on something like dinner or petrol bills, put that money in the emergency fund.  You will be surprised at how smoothly your funds grow. Most importantly, ensure that your contingency fund is a liquid investment and keep it aside in liquid funds or short-term fixed deposit for it to grow.

So, this Diwali, make it a resolution to keep yourself financially fit. It will automatically help you to manage your money proficiently. Here’s wishing you all a very happy & a safe Diwali!

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Tags assigned to this article:
personal finance

Rahul Jain

The author is Head, Personal Wealth Advisory, Edelweiss

More From The Author >>

Top themes and market attention on: