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Smart ways to spend your bonus money

  • Highlights

  • Paying off debts with windfall gains

  • Preparing a long-term investment plan

  • Exercising caution when spending bonus money

Receiving a bonus at work can be overwhelming, and it is natural to gravitate towards retail therapy or splurge on a holiday or home renovations. However, setting thoughtful spending goals can help you in the long run, and prevent overspending.
Want to make the most of your bonus money? Here’s a lowdown on how to be smart about spending this money effectively:

Bajaj Finserv Fixed Deposit

Enjoy, but cautiously:

You are sure to feel happy when you receive a bonus. There’s no harm in enjoying your earnings, but resist temptation to overspend. To ensure that you make the most of it, invest your bonus in financial instruments such as a fixed deposit, mutual funds or a life or health insurance policy. In other words, keep the larger part of your bonus locked away. This way, you won’t have the urge to dip into it every time you have an impulse to make an extravagant purchase.

Prepare a long-term investment plan

Often, when you come across a windfall gain, you have the tendency to spend it without any restrictions because you treat it as an addition to your disposable income. This is not the best attitude to have. Instead, treat it as a corpus that you can invest in several tools, for maximum gains. You could split it into fixed deposits of different tenors or put it into a mutual fund. The bottom line is that you must prepare a plan for your bonus so that you can multiply it effectively.

Additional Read: 7 Long-Term Investment Ideas Promising The Best Profits

Pay off high-interest debts:

When you receive your bonus, it is a good idea to use it to pay off high-interest debt. If you can’t foreclose your loan, use it to make part prepayments. This will help you reduce the amount of the balance EMIs. On the whole, your financial obligations will be significantly lower.

Additional Read: 4 Simple Ways to Manage Your Debt

Set up a retirement account for yourself:

If your investment portfolio is on track and doesn’t need any additions, you can use your bonus to set up a retirement account. You could do this by subscribing to a pension plan where you have to pay an annual subscription every year, also known as annuity.
Then, after you reach the age of retirement, the accumulated and compounded money is returned to you in the form of pension. You can also set up a retirement account in the form of systematic investment plans in mutual funds. Analyse which instrument will give you the most returns and make your investment accordingly.

No matter what you decide, ensure that your bonus isn’t lying idle. You must park it in a financial instrument that gives you some earnings on your deposit.

DISCLAIMER: The mentioned fixed deposit interest rates are indicative only, and may be subject to change periodically. Please check the interest rates on our website.

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