Expecting A Diwali Bonus? How To Invest It Smartly

By Adhil Shetty | September 28, 2017

If you are someone entitled to a flat Diwali bonus every year, what do you do with the surplus money? Do you spend it all in buying gifts and crackers or put it in lucrative investment instruments? With stores offering new sales and luring deals, it’s only human to get swayed by it. While it’s alright to allow yourself some indulgence, it’s important to strike a balance between spending these funds and allocating them for other financial objectives. It requires smart planning to churn this money for maximum benefits.

Here are few ways you can put your Diwali money to best use.

Buy Health Insurance

The treatment costs have been going up with time and it’s important to have sufficient health cover to meet this cost. If you have not taken a Health Insurance for self and family yet, it would be wise to use a portion of the surplus money to buy Health Insurance. Even if you are protected under corporate cover, a personal cover is required to get sufficient coverage.

Pay Off Debts

You could also use the money to clear off an outstanding loan amount. If you have debts with high-interest rate such as Credit Card debts and are unable to source funds to clear them off, put your bonus money to good use. Paying off your EMIs and clearing off your debt on time would help you save your interest outgo and keep your CIBIL Score strong.

Beef Up Your Retirement Fund

If your current income is sufficient to accomplish all your requirements in the short- and medium-term, you can use the Diwali bonus to increase your corpus for retirement. Instruments such as Mutual Fund and PPF are ideal for building a retirement fund.

Buy Term Policy

Just like Health Insurance, Life Insurance is crucial in a personal finance portfolio. Term Policy is the cheapest and provides sufficient coverage in case of any unforeseen circumstances. You can use the Diwali bonus to buy a life term policy of appropriate amount to ensure financial security to your family members in your absence.

Build a Contingency Fund

You could also allocate a portion of your bonus to build a contingency fund worth six months of your expense. This fund would come handy in case of emergencies such as job loss, prolonged illness etc. And, you must assess and evaluate the contingency fund from time to time to make amends whenever necessary.

Invest Towards Achieving Long-Term Goals

While the priority is to tackle immediate financial requirements, you must not lag behind in chasing your long-term objectives such as buying a house or life post-retirement. If you haven’t started saving towards meeting these goals yet, you can start small with the fund in hand or you can use it to beef up your already existing fund.

You can take these small steps without stopping yourself completely from celebrating. A smart allocation of funds can help you get the best of both worlds.

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About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

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