A Clever Way To Use That Bonus!

The following post is a sponsored post.

Congratulations! Your company has finally given you the bonus you deserve. Now, it is time to gather your friends and pop that champagne bottle. Before you finish that thought, hang on.

Sure, it is a good idea to party once you get a bonus. But keep in mind not to splurge the entire amount. Here’s how you can make good use of that bonus.

We recommend the following points:

1) Clear off your debts

Try to clear off any outstanding loans that you are currently servicing. It may be a college loan or a home loan or credit card debt. Make a list of all your loans and rank them in order of highest to lowest interest rate. By using your bonus to pay off high interest debt like credit card balances, you can free up your finances pretty quickly. In fact, using your bonus to this end is more useful than putting the money in a savings account. The faster you can get rid of your debt, the better you can manage your finances.

2) Investing any extra money you may have to reap benefits later

If you don’t have any outstanding loans, good for you. You can jump to this step directly. Investing money is like planting a seed. The results may not be visible immediately but in a few years, you can see big ripe fruits. Make a list of different financial goals you would like to achieve in the future. And using your bonus, you can kick-start your investing ambitions.

For example, you may want to build a corpus if you want to buy a home in the next five years or so. You can use your bonus to invest in equity funds in order to earn higher returns for the future.

If you have a daughter below the age of ten years, you can invest in the Sukanya Samriddhi Yojana. It is a savings scheme that encourages parents to create a fund for meeting future financial expenses of their girl child. The current interest rate offered of 8.1% on this scheme is still much higher than most other saving options like fixed deposits or Public Provident Funds.

3) Lump sum investment is ideal for those you have surplus cash at the moment

There are different ways to invest when you have a surplus amount of money. Most people tend to prefer regular monthly investments because it matches with their salary schedule. For example, once you receive your salary for the month, you can directly transfer a portion of the money into your Systematic Investment Plans (SIPs) or other investment options. But when you get a bonus, a lump sum investment is the best option. But in order to carry out your investments safely, you can use a Systematic Transfer Plan (STP).

An STP is a nothing but an SIP with a twist. Here, you transfer a fixed amount of money from one investment (liquid fund) to another (equity fund). With a lump sum amount, it can be a risky to invest the entire amount in an equity fund directly. As a result, you can start by putting the amount first in a liquid fund and then systematically transfer the money into equity fund. This way, you can minimize the risk in case the market falls down suddenly.

4) These investments helps you achieve your financial goals faster

Imagine that you have to buy a car or a house right now. It may not be possible. You may not have the required funds. But how about five years later? It can be possible, right. With steady investments, you can make your dreams come true. And when you get a bonus from your employer, it can be a great opportunity to make your dreams come much faster. Have a list of financial goals and work towards them steadily.

All said and done, you may want to use your bonus in order to buy stuff (a new sofa set or a gift for your parents) at the present. That’s normal behaviour. However, don’t forget to invest for your future. In a way, the bonus is like a small booster, giving you a push to reach your financial goals as fast as possible.

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