Most companies announce bonuses once or twice a year. Bonuses are based on company performance as well as the contribution of employees.
Most people use their bonus money carelessly in buying gifts or taking vacations and fail to utilise the same, which can otherwise be employed to enhance one's financial condition. Contrary to the popular belief, it is quite a trying task to plan out the expenditure of surplus funds when they are actually received.
Here are seven smart tips which will help you plan out your expenditure so as to make the most of your bonus money. The exact plan will depend on one's actual financial position but these guidelines will certainly provide a useful insight to how this money can be utilised in the best way possible.
Buy property: Buying a piece of real estate is one of the most common financial goals people have in India. Although there are plenty of home loan options available on easy terms in the market, one still has to pay up an initial 20 per cent as promoter contribution before applying for a loan. This amount is quite big considering the property price today, and also due to the fact that you will need to shell out extra money from your pocket for stamp duty, registration charges and so on. According to a recent ruling by the Reserve Bank of India (RBI), bonus money from a couple of years will add up to your savings, making it easier for you to acquire a dream home for yourself. This will also keep you prepared to buy the right property in case a good opportunity shows up.
Repay part of home loan: In case you have availed a home loan and are continuing with its EMIs, you can use the bonus amount to pay up a part of your outstanding loan. Home loans can drain your finances though they carry lower interest rates. Paying off a portion can reduce that burden a bit. Make sure that the EMI remains the same but the paying term or tenure is reduced through this prepayment.
Keep funds for emergencies: Emergencies always arrive unannounced. Ideally, a corpus of about half a year's salary is a good amount to keep as an emergency fund, which can be relied upon in the time of an urgent financial need caused due to unforeseen circumstances such as loss of job, car/home repair or health conditions demanding immediate medical care.
Invest in systematic investment plans (SIP): Keeping the volatile market conditions in view, SIPs are the best investment option for the average investor who does want to take big risks. Starting an SIP in equities can yield decent returns over a long period of time. The smartest way to use this lump-sum amount is to acquire debt funds and then start an SIP for equity funds with the same mutual fund company. This will provide security as well as growth which most of us seek in our investments.
Enhance insurance cover: The right amount of insurance cover that will cater to the needs of your family in the time of need is a fluctuating figure depending on various uncontrollable external factors. The cover amount must be periodically reviewed to make it meaningful in terms of the security it accords. Whenever you get a bonus, it is best to review your family's insurance cover and buy more cover with in case you feel the existing one is inadequate.
Get a better car: With constant hikes in fuel prices, the cost involved in maintaining a car is increasing steadily towards unbearable limits. An average petrol car costs about Rs 4 - 5 per kilometer. CNG, on the other hand, is a smarter fuel option, which almost costs one third compared to petrol. Availability of sufficient funds is one of the major constraints why people aren't able to fit their cars with CNG kits or buy new CNG-run cars. Consider the option of turning to CNG with the extra money you get as bonus.
Acquire gold: Gold is one of the safest instruments of investment that has never let down its devotees. Surplus money as bonus can be utilised to acquire gold - either as jewelry or coins - to have a secure investment for future. A bonus, since it is an extra source of funds and is not already there in our expenditure plan, presents an ideal opportunity to make a smart financial move that had been held up due to lack of funds.
Disclaimer: BankBazaar.com is an online loan marketplace. All information in this article has been provided by BankBazaar.com and NDTV Profit is not responsible for the accuracy and completeness of the same.