We work hard and wait eagerly for our annual performance appraisal - all for a few Rupees more! But more often this money gets spent in an impulsive way and we regret later and wish that you had used the money for a better cause. So we present to you a list of financially prudent things (in the order of priority) that you can do with your annual bonus:
Pay back your creditors
Many Financial Planners agree that it is wise to close out expensive loans like credit card debt, personal loans and overdrafts as soon as possible as we end up paying higher interest rate on the same. You may consider partial repayment of home loan or any other existing loans you may be currently running for which you are paying higher interest than what you would normally earn if you had invested the same at a competitive rate.
However, full repayment of home loan should not be considered if they have been taken recently. With the high interest during initial years coupled with pre-payment penalty, one will end up repaying more than what you would actually pay had you continued with the loan; besides, you will also have to forego the tax benefits available on home loan repayments.
You're future goals - A rupee well spent!
The most popular reason why people end up spending money on those that they actually do not want is because they don't have a clue on what to spend the surplus on!
Some of us buy ULIP policy on our well-wisher's (read: agent's) insistence, or decide to put the money into some mutual fund until we decide what to do with it.
Putting your money in the right savings instrument(s) is half the battle won. The best way is to avail the services of a qualified Financial Planner who would help you figure out your future goals and desires in financial terms and allocate your monthly savings, bonus and windfall money accordingly as per the investment period and your risk appetite.
The nominal fee you pay for good Financial Planning service helps you save significantly in taxes, transaction costs and comforts you with peace of mind knowing that your future goals and commitments have been planned for, and you can now focus on life's better things.
Still have surplus money? Splurge!
What is such life where you cannot splurge on things you crave for? When you put your financial house in order and then splurge on stuff you've been longing to get your hands on, the feeling is GUILT-FREE!
So this time around when you receive that hard-earned bonus, take a moment to think where you want your money to really go.
Written by Priya Rao