Use your Diwali bonus wisely!
Sun, Nov 08, 2015
Source : Citrus Interactive

Diwali is the festival of lights. There is a hope of prosperity. If you are a salaried person, you look forward to your Diwali bonus. It’s that time of the year again when the thought of your bank account credited with a month’s extra salary or whatever amount decided by the company is tickling your mind. A few months before you get it, you start thinking about what all your bonus can fund. While the entire e-commerce industry will try to tempt you to choose extraordinary offers on shopping, do not get swayed away spending this long awaited money on silly things! Diwali bonus can help you save a lot on your expenditures and also grow your money through wise investment decisions.

Let us see how you can wisely use your Diwali bonus…


Pay off a part of high cost debt: Firstly, do away with the high costing short term debt, like personal loan or credit card bills. There is no point investing elsewhere when you are paying higher interest rates on these loans. If not in full, at least make sure you do part payment of these debts. You could use your Diwali bonus to cut this expensive debt. Remember, your spending power goes up if you can borrow cheap.


Save for the rainy day: It is prudent to have at least 4-6 months expenses set aside towards any contingency needs. However, people are often not able to do that through their regular savings because of commitments towards EMIs, insurance premiums, SIPs etc. Or they may take years to build a contingency fund. A lump sum bonus can be used to create a contingency fund where by you would have some cushion in case of any eventuality such as loss of job, medical emergency and the like.


Meet your tax saving target:  This is especially useful for those who need to plan for their Rs 1.5 lakh deduction limit under 80 C of the Income Tax Act. Instead of scrambling for tax saving options at the last minute, you can plan to use a part of your bonus to invest in instruments eligible for 80C deduction.


Buy insurance which you have been postponing for want of funds: Underinsurance or no insurance for life, health and disability is perhaps the most common folly that individuals commit. Life is unpredictable and one can never be prepared enough for what may be in store tomorrow.  People may postpone the decision to buy insurances because committing large amount of money in one shot does not find favour with most. They would rather get the insurances in place over a couple of years. A bonus payout is a good opportunity to get yourself adequately insured. It is the best gift you can give your family.


That big purchase: So you were long awaiting the Diwali bonus so that you could buy an asset like a vehicle, LED TV, the latest smartphone or jewellery? You start setting aside some money each month. The Diwali bonus comes in handy here. With money in hand and festive offers from shops galore, you could negotiate a better price for your product. It is also important to save on your spending as much as possible.


Invest for long-term goals: If you have not planned long term investments, then bonus money can be a wiser option to do it. Identify your long term life goals like Children's Education, Retirement Planning or Buying a House. Often, due to non-performance of investments, it is possible that you may fall short on the targeted values of these goals. Bonuses may provide an opportunity to get your goals back on track and make good the lack of performance of the investment. Invest in the appropriate asset class which will help you in accumulation of the required corpus. You can either invest in lump-sum or can also plan to invest in periodic interval as per your goal.

Go on a vacation: If you are the kind who has been diligently saving every single penny and has managed to meet your savings target every single time, there is a good chance that the side effect of this could be no discretionary spending such as travel and shopping. Use this money to reward yourself and your family. Family vacations are an excellent opportunity to bond and provide exposure to your children. So if you don't remember when you took that last vacation, given yourself a break and take a vacation, guilt free.

Whichever option you choose, your Diwali bonus should help you in managing your financing more efficiently. Whether you reduce liability or invest for goals, the utilization should be planned.

So enjoy Diwali by planning your finances in a safe and secure manner. Wish you a safe, sparkling and financially-fit Diwali!!!

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