The end of the financial year brings with it the renewed hopes of increments and long awaited bonus. The choice that you make between the two options i.e. spending or investing your bonus can make a significant difference to your financial wellbeing in the long term. So, what constitutes a good plan to spend your yearly bonus? Here are some ways you can put your bonus to good use for your family’s financial security and well-being.
1. Invest for your long-term goals: It is a good strategy to periodically evaluate your financial goals and make changes if required. For example, you may have to set a goal for your child’s education but later realized that your child wants to pursue a career that will require more funds. In such cases, you would need to increase the amount of your investment to reach the revised goals. You can use your bonus towards goals that need more investments.
2. Staggered investments (STP) to take advantage of volatility: For long term capital appreciation, you may choose to invest your bonus in equity funds. In case you are worried about volatility in markets you could choose to invest the bonus amount into equity funds in a staggered way instead of lump sum. Its better to do with and advisor than do it on own.
3. Build an emergency fund: The nature of emergency is that it strikes without warning. It is imperative that you are prepared for any unwanted event like a job loss or medical emergency or any big financial issue. In order to be financially stable in such turbulent times , you need to build up a contingency or emergency fund.
4. Pay off debts: The most important area you should consider while spending your bonus amount is to reduce your BAD debt obligations. Your endeavour should be to pay off the loans that have higher rates of interest e.g. unsecured loans like credit card loans, personal loans etc. Don’t do it haphazard way.
5. Spend on upgrading your skills: In the current scenario where acquiring new skills has become sacrosanct in the fast-changing, technologically advanced work environment, allocating some part of your bonus to acquire skills that may help you stay relevant to times may be termed as a good investment too.
Conclusion: In the end, bonus is your hard-earned money. Try to evaluate the long-term consequences of splurging it on a lavish vacation or making that unnecessary renovation to your house or buying another expensive gadget. Plan what you need versus what you desire, because your decision might be the difference between your financial well-being and the lack of it in the long term. Contact your financial advisor to help you plan to invest your bonus amount for your long-term financial goals or wealth creation.
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