How to Use Your Diwali Bonus Effectively

As we get closer to Diwali, the festival of lights, many of you might receive a financial boost in the form of a bonus from your employers. Although you may be inclined to fulfil some long-awaited desires with the help of this additional income, what if you could improve your financial health instead?
 

If this is something you might be interested in, then this article can help. Here are some of the many ways in which you can use your Diwali bonus wisely to boost your financial situation.

• The Diwali bonus can help significantly enhance your financial health and situation.
• You can use the additional income to diversify your investment portfolio, reduce debt, and build an emergency fund.
• Alternatively, you can also use the bonus to invest in yourself to boost your career prospects, improve your home, or ensure that you and your family have adequate insurance coverage.

Here are some simple, yet effective ways to maximise the positive impact of your Diwali bonus. Each of these methods has been designed to contribute to the overall financial well-being of you and your family.

• Invest in new investment options
  
  If you already have investments, you can use your Diwali bonus to diversify your portfolio further by exploring new investment options that align with your financial goals and risk tolerance. If you have a high tolerance for risk, you could consider applying for some Initial Public Offerings (IPOs).
  
  Alternatively, if you are a conservative investor, you could consider alternative investment vehicles like Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). By widening your investment portfolio using the windfall gains from the bonus, you can significantly increase your chances of getting better returns and reduce overall risk.
  
  
• Increase allocation in existing investments
  
  On the other hand, if you are satisfied with your investment portfolio as it is, you could use your Diwali bonus to further increase your allocation. This particular strategy allows you to capitalise on compounding, especially in the case of long-term retirement-focused investments and systematic investment plans (SIPs).
  
  By increasing allocation in existing investments, you can essentially fast-track your journey towards achieving your financial goals. That said, when increasing allocation, remember to keep your original asset allocation intact.
   

• Reduce debt
  
  One of the best ways to use your Diwali bonus to improve your financial health is to pay down debt. By clearing high-interest debt like outstanding credit card balances and personal loans, you can effectively free up some money, which can then be used for more productive purposes.
  
  For instance, you can use the freed-up money to invest in new assets or increase the investments in existing ones. In addition to helping you reduce your financial burden, paying down debt will also increase your credit score by bringing down your credit utilisation ratio.
  
  
• Build an emergency fund
  
  Having an emergency fund is essential if you wish to establish financial stability. If you do not have one already, consider redirecting your Diwali bonus towards creating one. Now, remember to have the emergency fund in a bank account separate from your primary spending account. This will prevent you from dipping into it to meet your regular expenses.
  
  Meanwhile, if you already have an emergency fund you can use your bonus to give it a substantial boost. Ideally, an emergency fund must have enough funds to cover at least three to six months of living expenses.
   

• Invest in your future
  
  Investing in yourself is one of the most productive ways to use your Diwali bonus. For instance, you could use the windfall gains to enrol yourself in a course to upgrade your skills that can enhance your career prospects. Upgrading your skills could turn out to be useful in the long run since it can increase your earning potential, which is crucial for attaining financial stability and independence. Alternatively, if you have an entrepreneurial spirit, you could use the bonus to start a small business on the side. The additional income from the business can help you achieve your goals much faster.
  
  
• Make home improvements
  
  Home improvements indirectly boost your financial health by increasing the value of your property. When using your Diwali bonus to improve your home, make sure to focus on areas that could potentially offer the best return on investment.
  
  For instance, you could update the kitchen, redo the bathroom, or improve the overall energy efficiency of your home by upgrading to power-saving lighting and home appliances. Furthermore, making improvements at the right time can prevent your home from going into disrepair, which can prove to be very expensive to rectify.
  
  
• Purchase insurance or increase coverage
  
  An important part of financial health and security is having adequate insurance coverage for yourself and your family. Your Diwali bonus can help ensure you are properly protected from all kinds of risks.
  
  Start by thoroughly reviewing your current insurance policies – life, health, home, and auto – to see if they still meet your needs. If they are insufficient, consider using your bonus to increase the coverage or add riders for additional protection
  
  On the other hand, if you do not have life or health insurance policies protecting you, now may be the right time to purchase them. Although insurance might not seem like a productive way to use your Diwali bonus, it can help your family stay insulated from financially draining risks.

The festival of lights need not just bring joy and celebration into your life. With the right financial strategies, it can be the stepping stone for improving your financial situation and quality of life. When using the windfall gains, remember to strike a balance between your immediate needs and your long-term goals. Carefully consider your options and align your choices with your financial goals to ensure your Diwali bonus leaves the maximum positive impact.
 

If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.85% p.a.