Ahead of Eid, people tend to display relatively high levels of consumption. As a result, there is a surge in financial spending due to routine holiday practices, such as covering travel expenses for homecoming trips and giving gift parcels to relatives.
In fact, this pattern of significant spending often continues even after Eid. This imbalance should be anticipated. Therefore, the public is urged to pay closer attention to their expenses, even as the festive euphoria of Eid celebrations persists.
An economist at Universitas Gadjah Mada, Eddy Junarsin, stated that heightened consumption patterns are largely influenced by the festive atmosphere of Eid. According to Eddy, post-Eid consumption patterns are psychologically likely, as individuals tend to maintain their spending habits in a festive or joyful mood.
“As a result, expenses may unknowingly exceed normal levels,” he said on Tuesday (Apr. 7).
To prevent overspending, individuals need to develop an “awareness alarm.” This serves as a reminder that the festive period has ended. In light of this phenomenon, financial management needs to return to a more disciplined and strategic approach.
He also noted that various studies suggest that an ideal savings or investment ratio ranges from 10 to 20 percent of net income (take-home pay). Meanwhile, the debt service ratio, excluding mortgage payments, should not exceed 35 percent of income.
“The debt service ratio refers to the proportion of installment payments relative to take-home pay,” he explained.
Furthermore, Eddy encouraged the public, particularly students, to begin understanding and practicing investment from an early stage. This can be done through courses in financial management and portfolio theory, as well as by utilizing available investment platforms. In practice, investment analysis can be conducted using either fundamental or technical approaches.
In addition, he emphasized the importance of insurance as a financial protection instrument. According to him, health, vehicle, and other types of insurance function as risk management mechanisms through risk sharing. Therefore, in the event of unexpected incidents, the financial burden can be minimized, as a significant portion of the risk is borne by the insurance provider.
“If a risk event occurs, a person may be covered up to a certain percentage, for example, up to 80 percent. This is a common and important practice,” he said.
Eddy also highlighted the current global condition characterized by uncertainty, often referred to as VUCA (volatile, uncertain, complex, and ambiguous). People need to be wiser and more strategic in managing their finances, both personally and in business. He stressed the importance of ensuring that expenses do not exceed income, except for investment purposes.
He further suggested that investment strategies today do not necessarily need to be overly long-term, given the rapid changes in climate conditions and investment instruments. Instead, Eddy advised focusing on vital and tactical needs.
“Foster unity within communities, and reduce unconstructive debates or conflicts,” he concluded.
Author: Hanifah
Editor: Gusti Grehenson
Post-editor: Jasmine Ferdian
Photo: Unsplash