Smart ways to use your Bonus Money
It’s not quite usual that you see in your inbox that certain ‘X’ amount added to your usual salary and credited to your account. Now, intriguingly you call the accounts team or the supervisor and that when you get the good news that it’s the much deserving bonus that you have received for all your hard work this year. ‘Time for celebration’ is the first thing that will strike your mind. Well, that is ought to happen, after all, you totally deserve it. But whenever a large sum of money falls in your lap, you need to have a plan for it (even before you think of a mini celebration), so you don’t wake up a month or two later and realize that it’s all gone. Well, that’s not definitely a way to reward yourself for a job well done. While it may be tempting to blow all that on something fun, excessive spending isn’t the smartest way to handle your bonus. However, allowing your money to work for you smartly is the way to go about it. So here are some of the smart ways to deploy your annual bonus money.
Pay-off earlier debts
It’s kind of a good idea to get rid of financial obligations. And debt kind of priors the list and it should also be amongst your top priorities when you plan to utilize the bonus. Debts like credit card dues, personal loans, business loans etc. should be repaid especially the ones that bear very high-interest rates. Repaying the debts benefit you many ways in return – it helps you save a lot of interest payments, improves your credit score making way for obtaining further loans in the future.
Invest to earn
A long-term investment pays off well. There are multiple options where you can invest your money. You can opt for a SIP or utilize the amount to purchase stocks or lump-sum mutual funds. If you’re looking for conservative medium (no-risks attached), then opt for long-term investment options that offer not just tax deductions but also tax-free returns. You can choose from PPF, Kisan Vikas Patra,National Savings Certificates. If you don’t want any of these options, consider locking up the money in a fixed deposit.
Fund your Retirement Goal
Apart from the above-mentioned investment options, you can consider parking bonus money in a long-term financial instrument such that the benefits can be reaped post-retirement. Even though retirement often looks like a far away event, the earlier you start saving, better is the retirement corpus you can accumulate. And your older self will thank you for taking such a wise decision. A lot of retirement plans are available in the market, so choosing an appropriate one won’t be a problem.
Start an Emergency Fund
Nothing in this world is permanent or guaranteed and it’s always wise to be prepared for the unexpected. Let’s say your salary takes a hit or your car breaks down or a family member gets hospitalized. To take care of these unexpected events, it is important to have a contingency or emergency fund. And if you still have not created a separate fund for contingency then, you certainly need to create one with the help of the bonus amount received. Experts agree that it’s smart to have three-to-six months;worth of savings tucked away, or even more, to help protect you in case of disaster. So you can utilize this amount to get closer to this goal.
Enhance insurance cover
You need to on and off check whether the current life insurance cover you have is enough to service the needs of the family in the absence of the breadwinner. Now that you have a lump sum amount in hand, you can always get the cover enhanced. In the same way, review the health insurance that you own and go for a top-up policy if needed. Remember, that medical inflation is rising a 10% plus rate every year. Having a health insurance of at least Rs 5 lakh is a necessity in today’s situation.
Invest on Yourself
With the rising competition, self-development at any point in your career will help you stay on the floor. So, investing your bonus money to learn a new skill sounds like a great idea. Something which could be relevant to your job or an area of personal interest, such as photoshop, advance use of excel, an advance course, etc. It could be anything! Basically, anything you’ve been putting off for the longest time. Having said that you can also learn new things that you are passionate about – it could be learning a new instrument or learning photography skills or even culinary skill. All this would boost your confidence and help you grow professionally and personally.
To know more about smart ways to use your bonus money or a long-term financial planning connect with our financial planning expert for a better and secure future.