My younger sister called over the weekend to ask if I could lend her some cash.
"What for?" I was curious.
I got a vague answer that covered shopping and hanging out with friends during the December-January party season.
"How much do you want?"
She hemmed and hawed and could not even come up with a figure. She was hoping I would decide that for her.
Which is why I have written this piece. It is for her benefit and for all those who are planning to splurge but are wary of what bills will be produced come January.
Broadly, there are three categories of expenses. You will have to draw up a budget for each of them.
Clothing
This would include shoes, bags, jewellery and other accessories.
Make note not only of all your parties and visits to discotheques/ pubs, but also of all the weddings you have to attend.
Mix and match. Be flexible and innovative.
If you are attending weddings where the crowd is totally different, you can probably repeat your outfit.
Going partying? A new jacket over an old outfit will gives a new look.
If you are buying trousers or skirts or slacks, ensure they will go with a number of your tops or shirts.
Make one branded garment the highlight of your outfit. Let the others play supporting roles. Don't go for fully branded attire.
Even if you are wearing the same outfit, change the jewellery and the scarf to give it a totally new look. Guys can probably wear the same pair of jeans as often as possible with just a change in the shirt or T-shirt and belt.
Most importantly, buy what you are looking for, not what you are seeing.
If you already have a number of trousers, don't purchase another one just because it is on sale or it has caught your eye. Don't buy a casual outfit when you need a formal one.
Gifts
My other sister loves giving Christmas gifts.
A smart way to tackle this is by first drawing up a list of people you have to present with a gift.
Once that is done, put a tentative cost against each person and shop within that limit. And, yes, carry that list with you when you go shopping.
If you find that someone's gift has exceeded the budget, see if you can pare the cost down on another gift. There are a host of gifts options ranging from the expensive to economical, so it is easy to be flexible.
Don't make the mistake of going shopping without planning for what you need and then buying whatever catches your fancy.
When my sister gives gifts to her friends who are couples, she presents them with one gift instead of two.
For instance, one person in the couple was crazy about greenery in the house, so she picked up a lovely potted plant for them. If it is a family with young children, she will take a box of chocolates or cookies or a cake.
List down all the gifts you are expected to give: wedding, Christmas and birthday. Then, start budgeting. Obviously, a wedding gift would be more expensive than a birthday gift. A Christmas gift need not be expensive because it is more a sign of goodwill and thoughtfullness.
But, then again, it all depends on who the recipient of the gift is. A birthday gift for a friend's child should hold less weightage than a Christmas gift for your fiancé.
Hanging out
This is where all your entertainment comes in. Do you plan to call people over? Or go out with them?
If you are invited to someone's house, then spending is not an issue. If you are eating out, going dutch will be much more economical.
You will end up spending a lot if you are going pubbing. Try cutting down your consumption of alcohol. This way you drink, but don't drink too much.
If you are entertaining, calling people over and cooking up a meal works out to be cheaper and more fun than taking them all out to a restaurant.
Getting the cash
Now, decide how much you expect to splurge in the above categories. You don't have to be totally accurate; just get a general idea of where your money will be going.
Once you arrive at a figure, calculate how much you can afford and how much you need to borrow.
Ask family
My sister is eventually going to be picking my wallet. And, though it will be an interest-free loan, I will definitely ask her how long she plans to take to repay the loan. I am not generous enough to part with an interest-free three-year loan.
If you are borrowing money, ask for a reasonably amount. Don't go overboard just because it will be an interest-free loan.
Decide how long you will need to repay the loan and commit yourself to it.
Credit card
Should you overspend on your credit card and begin to revolve credit, promise yourself you will repay it within the next few months.
Revolving credit means you don't pay your entire credit card bill. You pay just the minimum amount of 5% or 10% (or more); the remaining amount is added to your bill for the the following month.
You will be charged a rate of interest -- which will be somewhere between 2.5% to 2.75% per month -- on the amount you carry over. And -- here is the catch -- whatever fresh payments you make on your card will also be included.
So, if you owe the bank Rs 10,000 (which is being revolved), you will be charged interest on this amount. Now, if you go out for dinner and pay for the bill on the card, this amount will also be added to Rs 10,000. Let's say it is now Rs 10,800. The rate of interest will be levied not just on Rs 10,000 but on Rs 10,800.
The only way out: Stop using your card.
So as long as you are revolving credit, avoid using your card because all your expenses will be charged interest.
Personal loan
Consider a personal loan only as a last and desperate resort. Here too, look at repayment quickly.
You won't get a personal loan with a repayment tenure of less than a year. So, budget for the Equated Monthly Installments -- the amount you pay every month towards the repayment of the loan -- for the coming year.
Both the above loans are expensive options. Besides, they don't offer a tax break.
On credit cards, the interest amounts to at least 24% per annum (at 2% per month). A personal loan will be charged an interest of around 18% onwards. Even if you get the personal loan at a discount, it would be around 14% per annum.
So, do yourself a favour and make repayment a priority.
And, yes, wherever the money comes from, do have a blast.
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