Financial planning tips for a brighter Diwali.

Diwali is the vibrant Festival of Lights, which is celebrated all around Australia by the Indian diaspora. The word Diwali comes from the Sanskrit word deepavali, meaning rows of lighted lamps. The Diwali festival runs for five days, with the main event happening on the third day.

We spoke to Sheba Nandkeolyar, Founder/CEO MultiConnexions Group and National Chair of Women in Business, Australia India Business Council. about the importance of Diwali, "As a proud member of the Indian Diaspora, Diwali is the biggest festival in our calendar. Diwali is also the start of a financial new year for many Indian business owners. Financial wellbeing takes on a special significance at this time, when old ways are reviewed to make way for the new. This is a time when the mindset is at its most receptive and open to financial guidance which can improve one’s peace of mind & quality of life. It’s a time when perspectives in health & financial prosperity come together. A time when financial wellbeing takes on an all-new persona, not just for me but for over a million Indians residing in Australia."

Diwali is a festival of new beginnings, and it also offers the opportunity to learn some key financial lessons that you can put into action to improve your financial wellbeing.

Day 1: Financial planning for your future. 
The first day of Diwali is known as Dhanteras (the festival of wealth). "Dhan" means wealth and "teras" refers to the 13th day of a lunar fortnight in the Hindu calendar. It’s never too late or too early to start planning to generate the money for your future self’s needs and goals. Accumulating wealth over time requires three ingredients:

• Sources of income: you’ll need long-term sources of income, after you’ve covered your necessities and debt repayments, you can then save or invest.
• Saving money: once your income is sufficient to cover your basic expenses, you’ll need to develop a proactive savings plan.
• Investing money: once you've set aside a monthly savings goal, invest it prudently.

Time is one of the most important factors in the growth of your savings and the potential success of your investments. This is because time and compounding may work together to build momentum for your investments. Compounding is the process of continually adding any earnings you might receive to the amount you contribute (principal) and then reinvesting them to create more potential earnings. The more time your money has to earn, the more opportunity for compounding. Watch this video, to understand how compound interest works. 

If you have an investment portfolio or are considering starting an investment portfolio, a key factor to consider is diversification, which means having money invested across a range of different investments. That might mean diversifying across markets, countries, asset classes – from cash through to shares, products, and even investment managers. Spreading your money across multiple investment types doesn’t just help to protect your portfolio from significant market movements. It can also help to lower risk by smoothing out your returns from one year to the next.

Day 2:  Set goals for your money.

The second day of the festival is known as Chhoti Diwali (small Diwali). This is when candles and lamps are placed throughout homes, people prepare for visits from family and friends, and wish each other a bright future for their lives ahead. Setting goals helps people to prepare for a bright future. Some financial goals to consider are:

• Building an emergency fund.
• Paying down debts.
• Set short-term and long-term financial goals.
• Plan for your retirement.

A financial goal should detail:

• What you plan to accomplish.
• The resources and how much time you'll need to make it happen.
• How you plan to work your goal(s) into your budget.

Day 3: Protection for yourself and your family.  

The third day is the most important day of the festival, it’s Diwali or Deepavali. This is an annual celebration of light over darkness.  It’s also the beginning of the new financial year in India. The day also acknowledges the importance of financial security in life.

For help to discuss income protection insurance, trauma insurance, total and permanent disability insurance and term life cover, you should speak to a financial advisor. TAL is Westpac’s life insurance partner. To find out more visit the TAL website. 

Day 4: Keep credit cards under control.  

The fourth day of the festival is Bestu Varush, or New Year’s Day, which represents the beginning of a new cycle. Whilst memories of gift buying, food preparation and all the expenses associated with Diwali are front of mind, it’s worth considering how you can keep your credit card spending under control. Here are some simple tips to help you remember to pay your credit card statement on time:

• Set up automatic payments from your bank account.
• Set reminders on your phone or in your calendar.
• Pay your bill as soon as you get it.
• Paying off your card in full during the interest free period is a great way to minimise your total repayment.

Day 5: Support family members in need without compromising your own financial future. 

The fifth day of the Diwali festival is Bhai Dooj, it’s a day to celebrate the bonds of love between siblings and people often exchange gifts. The types of gifts will vary between families, but the intention remains the same, it’s about showing you care. Some people may feel it’s their responsibility to provide financial support to family members in need. Whilst taking care of family members is good, it’s important that this doesn’t come at the cost of compromising one’s own financial situation.

Here are some tips on how to help a loved one while protecting your own financial future.

• Review your financial situation first. Before agreeing to help a loved one financially, check your budget. Try this Davidson Institute Budget Planner, for a step by step guide to help you develop an effective budget. You may even seek guidance from a financial advisor to discuss your income and expenses as well as the request for support.
• Using your budget, consider if you’ll be able to pay your own bills and save for your future goals, if you agree to help.
• If you can’t afford to help, or its conflicting with your goals, it’s important to be clear and say no to the request.
• Take a pause before deciding to help and consider whether the need for financial help is temporary or not, and whether your loved one has a plan to avoid needing help in the future.
• If you do decide to help financially, make sure you have a clear agreement between you and the loved one asking for help, such as a loan or gift, and any terms for repayment. Or if you want to help them with a loan, consider whether you want to make a personal loan or to co-sign a loan they are seeking from a financial institution.
• A way you can help is to consider giving them cash, paying one of their bills directly, or providing them with non-cash assistance, like gift cards, or access to certain resources they need.

Illuminating your financial wellbeing.

This Diwali maximise your celebrations by taking time to consider what you need to do to improve your and your family’s financial wellbeing, so you can have a safe and secure future.

If after reading this you’re wondering how to celebrate Diwali, one last top tip, beyond the lights and gifts – sweet treats and Diwali go really well together!

Wishing you and your family a happy, safe and prosperous Diwali!

Content current as of 24 August 2022.

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.