5 financial lessons that Diwali teaches us

Table of Content

1. Day 1: Dhanteras (Day of fortune) - Future planning

2. Day 2: Naraka Chaturdashi (Day of knowledge) - Invest based on goals

3. Day 3: Diwali (Day of light) - Bring diversification in investments

4. Day 4: Annakut/Padwa/Govardhan puja (New Year) - Cleaner portfolio

5. Day 5: Bhai Duj/Bhau-beej (Day of love between siblings) - Protect and love

One of India's most prominent festivals, Diwali celebrates the triumph of light over darkness. The five-day festival of lights is a reminder to secure finances, dispel the darkness of ignorance and boost fortunes with financial planning. So what are the learnings each day of the celebration offer?

Day 1: Dhanteras (Day of fortune) - Future planning

Fortune favours those who plan for the future. The first day of Diwali is a symbol of annual renewal, cleansing, and an auspicious beginning. Everyone needs to evaluate their finances, cleanse themselves of bad financial habits and invest. Early and smart investments mean better returns. 

Day 2: Naraka Chaturdashi (Day of knowledge) - Invest based on goals

When planning to invest, knowledge is the key. The second day of festivities and its rituals are to liberate any souls from their suffering in Naraka, or hell, as well as a reminder of spiritual auspiciousness. So as to not get pushed into a hell-hole of bad investments, one must base their investments on distinct goals.

Goal-based investing incorporates the changes in the financial plan and helps cull maximum benefit. If you have decided on a goal, you can start investing from an earlier stage to meet those goals. Investment plans should always be focused on important goals, like buying a home, retirement, children's education, marriage, and home-improvement projects.

Day 3: Diwali (Day of light) - Bring diversification in investments

Get some variety into the mix. Considered the main day of the festivities, fireworks are lit to celebrate the last day of the Hindu year - Lakshmi puja. On the night of Lakshmi puja, rituals across India are dedicated to Lakshmi, goddess of wealth, to welcome her into their cleaned homes and bring prosperity and happiness for the coming year. It's the day that includes a variety in everything - from firecrackers to gifts to special snacks. Similarly, one needs to make sure to invest in the right mix of investment products. A diversified portfolio reduces risk.

Day 4: Annakut/Padwa/Govardhan puja (New Year) - Cleaner portfolio

Start afresh. The day after Diwali is the first day of the bright fortnight of the lunar calendar. Considered as the first day of the New Year and celebrated through the purchase of essentials, aka sabras or good things in life and offering prayers to Krishna. One must apply a similar approach and periodically glance at one's investment portfolio. It is important to identify investments that are not performing well. Ensure that the existing investments are in sync with goals or objectives.

Day 5: Bhai Duj/Bhau-beej (Day of love between siblings) - Protect and love

Protection is the most important. On the last day of Diwali, siblings exchange gifts to show respect and offer protection. In some traditions, the women recite tales where sisters protect their brothers from enemies that seek to cause them either bodily or spiritual harm.

In life insurance-related matters, one must adopt a risk management practice. It is important to have adequate insurance cover to meet the requirements. Common mistakes when buying life insurance include failing to act at the right time or investing less or more than required. One should ideally buy life insurance at a young age.

Every year, Diwali comes as a reminder to take charge of fiscal health. The festival of lights teaches us various financial basics that can be implemented in real life to have robust financial planning. It's time to get to an auspicious start, plan your investments, and celebrate a financially well-planned Diwali!

ARN: ED/10/19/16284