Smart ways of utilising your bonus
Professionals often get bonus for the performance they put in at work. Some get the due amount during the festive season or during New Year’s eve or an annual bonus at the end of the financial year, which brings great joy and happiness, as it helps most of us to fulfil our short-term goals or desires.
Rather than splurging the amount, you need to utilise the money wisely so that it benefits you in the future.
Here are some of the smart ways to use your bonus:
- Invest in tax saving funds: If you are risk-averse by nature, you can opt for safe tax saving investment options like Fixed Deposit (FD) or Public Provident Fund (PPF). On the other hand, if you are looking for market-linked financial instruments, you can start investing in the Equity Linked Savings Scheme (ELSS), Unit Linked Investment Plan (ULIP), or the National Pension Scheme. All the tax-saving funds are eligible for tax deductions under Section 80C of the Income Tax Act.
- Emergency Funds: The very objective of creating an emergency fund is to help you sail through smoothly, in case of financial roadblocks, for instance, temporary loss of a job, the unexpected closure of business, etc. A bonus is the perfect chance to start building an emergency fund to face any financial crisis with ease.
- Pay off debts: Another way to use the bonus effectively is to ease the debt burden. If you have an ongoing Home Loan, Car Loan or Personal Loan, use the bonus to clear off loans, preferably those with higher interest rates. Reducing the loan burden is one of the best ways to enjoy more of your salary.
- Invest in Life Insurance: A festival is the apt time to secure your family from the darkness of uncertainties. You can use the bonus amount to buy a Life Insurance policy, as it will assure that your loved ones are safe during your absence. Purchasing a Life Insurance policy is one of the best investments for your family.
- Invest in Mutual Funds: A productive investment avenue like Mutual Funds will help you achieve your financial goals by accumulating wealth and countering inflation at various life stages. Mutual Funds are professionally managed by asset management companies or fund houses that let you invest in distinct asset classes. It facilitates liquidity. Even if you are an amateur, Mutual Fund allows you to begin young with smaller contributions through Systematic Investment Plans (SIPs). In order to create wealth, investing in the market, as a long-term strategy, is the fundamental essence of Mutual Funds.
Rather than using the bonus to splurge on shopping and other tempting offers, it is best to have a plan in place. This will help you put your money to better use. Therefore, it is imperative to create a strategy in advance before the bonus amount gets credited to your account.
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