Annual bonus time? Woohoo! Don’t go out and splurge just yet. If you’re looking for some advice on what to do with your bonus, let’s help.
Get it out of your salary account
You just got an SMS alert from your bank informing you that your bonus has been credited to your account. Party time? No! The first thing you should do is transfer the bonus amount from your salary account into your savings account. Lock it away as soon as you can to avoid the temptation of splurging the money.
Clear any bad debt
If you have any Personal Loans or Credit Card dues that are pending, you could use your bonus to clear them. Tackle these and you can rest easy. You don’t have any debts? Sing your way to the bank. Save the money.
Save your bonus money by putting it into your emergency fund. What’s an emergency fund? Well, that is a corpus of at least 6 months of expenses that you should hold in your savings account. For rainy days, you know.
Additional Reading: Savings for Young Adults at their First Job
You could also earmark your bonus and put it away to save for future expenses you might have, or any savings goals you’re aiming at.
Need more ideas?
Prepay your Home Loan
Use your bonus to prepay your Home Loan. This will help you lower the interest amount. You may want to skip that holiday you were thinking of.
Make a long-term investment
In case you don’t mind taking a little risk with your money, a Systematic Investment Plan would be a good idea for you. A Systematic Investment Plan has a minimum tenure of 3 years. You can start an SIP with an investment as little as Rs,1,000 per month.
National Savings Certificates are government bonds in which money can be invested for a tenure of 5 years or 10 years. Investing in these certificates will give you an interest of 8.1% and income tax benefits.
Putting the money away in a 5-year Fixed Deposit could give you a number of advantages including:
- Tax saving benefits
- Interest earned on the Fixed Deposit
- An emergency fund that you can break quickly in case of a financial contingency
Good financial planning is a key factor for everyone. Be smart and save or invest your money wisely.
Additional Reading: Tax Deductions Demystified
Finally, reward yourself
You’ve been working hard. You truly deserve that bonus. If you’ve been following your financial plan to the letter, it’s time to reward yourself. You could use 10% of your bonus for this. Pamper yourself.