For most of the salaried professionals, this time of the year brings in much joy and a sense of achievement. You get your annual bonus besides your usual monthly salary - just like the icing on top of a cake. While many of you will be tempted to spend all your bonus as it is an "additional income", there are many ways in which you can invest this extra income to improve your financial wellbeing and achieve your financial life goals.
1. Pay off any credit card debt or loan debt you may have accumulated:
Having unpaid credit card bills not only costs you a lot of extra money in late fees and interest but also lowers your creditworthiness and rating, which is not good for your overall financial well-being. Use your bonus to pay off any credit card bills that are unpaid. This will not only bring up your credit score but ease off a huge financial burden from your head. Similarly, if you have received a substantial end of the year bonus you can use this as an opportunity to reduce your bigger loans: home loans, education loans amongst others. This will give you the opportunity to use your usual monthly income for other expenses.
2. Evaluate your life goals
Use your bonus as an opportunity to review your long and medium-term goals and how your finances need to be adjusted to achieve the same. Once you have understood your financial needs for the upcoming years, you can use your bonus to invest in a plethora of options, including a new age ULIP plan that will help you build a corpus for fulfilling your life goals. If you have already invested in a ULIP, use the additional bonus income towards top-up investment on existing ULIP and take part in the burgeoning markets. However, ensure you have done proper research and mitigated the risks before investing in markets.
3. Add to your rainy day fund
Your bonus can be the perfect opportunity for you to add into your rainy day fund or set up one if you have not done so already. It is recommended to have enough in your rainy day fund to cover anywhere from three months to one year of expenses, including monthly EMI payments, rent, school fees, electricity and water bills, amongst other expenses.
4. Invest in yourself
Your bonus offers you the perfect opportunity to reinvest in yourself. Use the bonus amount to hit the gym or join the music class you wanted to take or just pamper your family with special gifts. This will make you feel happier and healthier, and you will know you've put your money to good use.
The bonus that you receive is a reward for all the hard work you have been putting in. While it can be confusing to think of all the ways you could spend this additional income, remember to take a second and remind yourself of the fact that you have earned this because of your hard work and determination to achieve your work goals. You must hence enjoy your bonus and make it memorable by putting it to good use.