Use your bonus smartly to reap dividends in the long run
It’s that time of the year when the salary credited into your bank account is a little more than other months. The bonus season is on and utilizing this instant flush of liquidity smartly can help you address several long-term needs. Here are 5 smart ways to utilize your bonus.
Prepay Existing Loans
One of the prudent uses of bonus is to prepay your existing loans – personal, home, car, etc. Being debt free gives a freedom from stress and prepaying loans using the extra money credited to your account is a gateway to that freedom.
Note that the longer the tenure of a loan, the greater is the interest outgo. However, prior to prepaying, find out the interest levied by your lender (if any).
Set Up an Emergency Fund
Setting up an emergency fund to take care of daily expenses, EMIs and insurance premiums among others for at least 4-6 months against sudden job loss, layoffs, etc., is one of the fundamental aspects of personal finance.
You can park your bonus into liquid funds to set up an emergency corpus. Liquid funds are debt mutual funds that invest in instruments with a maturity period up to 91 days.
Purchase a Family Floater Health Insurance Plan
Rising medical inflation has pushed up healthcare costs manifold. With this inflation barely showing signs of reversal, it is essential to protect your finances against medical contingencies. A family floater health insurance plan is an ideal way to safeguard dipping off your savings when faced with a medical emergency.
A smart way to use your bonus is to purchase a family floater health insurance plan. You can compare offerings of various insurers online and choose the one that best suits your needs.
Invest in Tax-Saving Instruments
Instead of making investments in tax-saving instruments in the month of March and end up making wrong choices, it’s ideal to start tax planning right now. Investing your bonus in tax-saving instruments such as PPF, EPF, NPS, etc., among others not only aid you to save taxes, but also build a sizeable corpus for your financial goals.
Investing your bonus in tax saving instruments would reap dividends in the long run and ensure you remain disciplined with your money.
Build a Corpus for Your Child’s Education
Just like healthcare, education costs too have gone up by leaps and bounds over the years. A conservative estimate of inflation even by 6% would push up an engineering degree cost to ₹15 lakh in the next 16 years from the ₹5 lakh now.
Hence, it’s essential to build a corpus for your child’s education from now and park your bonus in instruments such as balanced mutual funds with an equal balance of equities and debt.
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