Ramadan 2021: 7 ways to avoid Eid holiday debt
Savings can be made this year because of Covid-19 restrictions, financial experts say
With Eid Al Fitr just around the corner, it's the perfect time for those celebrating to review their expenses and avoid building up expensive holiday debt. Given that the world is still caught in the midst of the Covid-19 pandemic and an economic slowdown, financial experts recommend that people are prudent over Eid and not spend beyond their means.
The most common expenses incurred during Eid include the cost of entertaining – catering, restaurant costs, extra groceries for home celebrations and decorations if entertaining at home. Buying new clothes, purchasing gifts for friends and family, and charity donations are other costs associated with Eid celebrations that can add up quickly.
In the past, Eid was also a popular travel time, with those celebrating visiting family and friends abroad and non-Muslims taking advantage of the public holidays to go overseas.
However, with travel restrictions in place around the world and limitations on the number of people who can gather in one place, you don't have to spend as much this Eid.
“As there are restrictions on how many people can gather together both at home and in restaurants, there is less opportunity to host large gatherings,” says Carol Glynn, founder of Conscious Finance Coaching. “In the past, these gatherings would likely cost more than this year as large amounts of family and friends could be hosted either in venues or at home.
Financial experts share their top tips on how UAE residents can cut their spending and avoid going into debt over the the Eid holiday.
Plan ahead and make a list of all your possible spending during Eid, says Rasheda Khatun Khan, a wealth and wellness expert and founder of Design Your Life.
Include gifts for friends and family, new clothes, food, charity donations and other expenses.
As there are restrictions on how many people can gather together both at home and in restaurants, there is less opportunity to host large gatherings
Carol Glynn, founder, Conscious Finance Coaching
“This way you will have a clear mind on what and how you will spend money. It is too easy to end up getting additional things that can be avoided,” Ms Khan adds.
The next step is to ensure you stay within your limit and take note of everything that you spend.
Don’t forget life outside the festive season
If you track and review your finances regularly, you will already have an understanding of your monthly financial needs. Ensure you have enough set aside to cover your everyday needs such as rent, electricity and groceries (outside festive celebrations) and regular savings. Only allocate what you have left to your Eid spending, says Ms Glynn.
“Ideally, this review and planning would be done in advance of Ramadan and Eid, so there is time to save each month towards this additional spending. This way, you can spend with confidence and without worrying about the impact on your financial situation and without raising debt,” she adds.
Have an Eid budget and stick to it
It is important to have an Eid budget in mind so you do not end up spending more than you can afford, leading to an increase in credit card debt.
“Once you have a figure in mind, assess if it is affordable. Ask yourself: 'How will you pay for it, are the funds available? Are you taking the funds from something else that is more important?' Once you have decided on a budget, be sure to stick to it,” Ms Khan says.
It’s also good to set expectations at the outset with friends and family members to limit spending for Eid. “Set an amount with family and friends for a gift exchange and this will help you stay within budget,” Rupert Connor, a partner at Abacus Financial Consultants, says.
Don’t succumb to pressure to spend
People often get caught up in Eid celebrations and tend to spend extravagantly. However, financial experts say it is easy to celebrate without overspending.
“Know your values, know your budget and if you are tempted to overspend, think back to your values. Is the purchase really important to you? Will it really enhance your Eid celebrations? If yes, then it is likely a worthy purchase. If not, then this exercise will help you come to the conclusion that it’s not worth the cost,” Ms Glynn says.
When people are tempted to overspend, they should weigh the long-term impact of additional spending on their finances.
Set an amount with family and friends for a gift exchange and this will help you stay within budget
Rupert Connor, partner, Abacus Financial Consultants
“Will you be paying for this purchase for the coming year, with interest added on and is it worth that to you now?” Ms Glynn adds.
Shop online, make a list
People tend to spend less if they shop online with a list prepared in advance. Use the search function on the website to shop for specific products to avoid impulse buying, Ms Glynn says.
“This way you only see the items on your list and are less tempted to impulse buy items you don’t need. If shopping online is not feasible, then ensure you have a list prepared before you go shopping. Find the items on your list first and avoid browsing the aisles to avoid temptation,” she warns.
It's also important to allocate one or two days to do all your Eid shopping, Ms Khan says. This will ensure you are focused on what you need. It will be easier to stick to your Eid budget, she adds.
Take advantage of discounts
Shoppers should also look around for deals, discount codes and special offers on items they wish to purchase for Eid.
“But be very careful not to be tempted by discounted items you don’t need,” Ms Glynn says.
She recommends waiting for 24 to 48 hours before purchasing something you’re unsure about to avoid impulse purchases. If you feel you need it after 48 hours and it’s within your budget, you can purchase it without feeling remorse and guilt, she adds.
People can also save money by using reward points to purchase items during Eid.
“This means planning where one shops and being frequent there in order to build up points, which can help make a dent in Eid spending costs,” Mr Connor says.
Allocate a monthly budget for your annual Eid expenses
Rasheda Khatun Khan, wealth expert and and founder of Design Your Life
Plan now for the next Eid
Once Ramadan is over, review your spending and make a note of how much you spent on each category, Ms Glynn says.
“Were you happy with your decisions and where you spent your money? Make a list of any changes you would like to make and set this budget for next year and start saving each month towards next year’s cost,” she says.
Divide the amount by 10 and save that amount in your Ramadan savings fund each month. It is much easier to save a smaller amount each month than trying to find 100 per cent from one pay cheque. For example, if your budget is Dh5,000, save Dh500 a month for 10 months, Ms Glynn says.
“Planning ahead will give you longer to save the money you need. It is better to put a smaller amount away over a period of time than to find a lump sum immediately. Take it a step further and allocate a monthly budget for your annual Eid expenses,” Ms Khan says.
It's also a good idea to set up a separate Eid account and automatically transfer a monthly amount to ensure you have all the money you need for Eid Al Fitr in 2022.
Published: May 6, 2021 09:00 AM