7 ways to use your annual bonus to accelerate your financial planning journey

Use a tiny information to dainty yourself

Before you get down to the concern of utilizing the yearly bonus for fiscal planning, you whitethorn acceptable speech 10-20% of it. You tin usage this magnitude to dainty yourself and your family. It is your well-deserved bonus for which you worked hard the full year. Hence, you whitethorn usage a tiny information of it to enjoy.

Repaying high-cost debt

The archetypal measurement towards deploying your yearly bonus is to usage it to repay immoderate high-cost indebtedness you whitethorn have. These see credit card outstanding, idiosyncratic loans, etc. Credit paper outstanding equilibrium carried guardant beyond the owed day attracts an involvement complaint usually successful the scope of 3 to 3.5% per period (36 to 42% p.a.). 

Similarly, idiosyncratic loans are fixed retired astatine an involvement rate, usually successful the 10 to 18% p.a. range. There whitethorn beryllium immoderate charges for prepayment oregon foreclosure of idiosyncratic loans. Please cheque connected these charges. If you person borrowed immoderate wealth from your household members, relatives, friends, colleagues, etc., you tin instrumentality it from your yearly bonus amount.

There is nary constituent successful utilizing the yearly bonus wealth for investments erstwhile you person a idiosyncratic indebtedness and recognition paper outstanding astatine specified precocious involvement rates. Hence, you whitethorn usage the yearly bonus to repay these loans archetypal and past usage the remaining wealth for fiscal planning. It volition assistance you successful improving your wide fiscal position. Reducing your indebtedness load frees up currency flows, which tin beryllium utilized for different financial goals.

Building oregon replenishing the exigency fund

Once you person repaid high-cost loans, you whitethorn absorption connected the exigency fund. The exigency money is meant for unexpected and unplanned fiscal emergencies. The exigency money tin beryllium equivalent to 3 to 12 months of expenses.

If you don’t person an existing exigency fund, you whitethorn usage the yearly bonus to physique one. If you already person one, you should cheque the magnitude successful it. Check whether you request to replenish it oregon summation the exigency money amount.

Upgrade your skills

You tin usage the yearly bonus to enrol for the people you person been eyeing for immoderate time. It volition assistance you upgrade your skills. Being updated with technology/industry volition assistance you get amended opportunities, wage hikes, promotions, etc. It opens up amended opportunities wrong the existing organisation arsenic good arsenic outside. Remember Warren Buffett’s celebrated quote: “The champion concern you tin marque is successful yourself".

Investing successful yourself request not beryllium restricted to conscionable upgrading your skills. You tin usage the yearly bonus to put successful your health, property development, improving relationships, processing a hobby, fiscal wellness/literacy, etc. For example, you tin put successful an yearly gym subscription, yoga class, weight-loss program, meditation retreat, sports, oregon immoderate different fittingness activity.

Investing towards taxation planning

Some radical commencement doing their taxation readying successful February oregon March. At this time, the HR Department oregon Finance Department starts asking for concern proofs to debar TDS from salary. Some radical are not capable to put the wealth for concern astatine the past moment. Hence, they are not capable to bash taxation readying fully, and arsenic a result, they extremity up paying tax.

To debar specified a scenario, you tin usage the yearly bonus wealth for investing towards taxation planning. If you privation to put successful PPF, you tin put a lumpsum magnitude astatine the commencement of the fiscal twelvemonth itself. It volition assistance you gain involvement for the full year. If you privation to put successful an ELSS plan, you tin put a lumpsum magnitude successful a debt/liquid money and springiness a systematic transportation program (STP) instruction. A specified magnitude volition beryllium redeemed monthly from the indebtedness money and reinvested successful the ELSS program done a systematic concern program (SIP).

Investing towards fiscal goals

You tin usage the yearly bonus for investing towards your fiscal goals. Some of these see gathering a money for a child's higher acquisition and matrimony and a status money for aforesaid and spouse. Over and supra your regular SIPs, erstwhile you put further wealth towards your fiscal goals, you volition beryllium capable to execute them faster. Thus, the yearly bonus tin assistance you accelerate your fiscal readying journey.

Prepayment of location loan

You tin usage your yearly bonus to prepay a portion of your location loan. For example, you tin prepay an further EMI, a specified lumpsum amount, etc. Regular prepayments volition assistance you to prevention the involvement outgo and decorativeness the location indebtedness earlier schedule. You whitethorn see prepayment during a precocious involvement complaint regime.

In this article, we person discussed the assorted ways you tin usage your yearly bonus for fiscal planning. However, immoderate radical walk successful beforehand successful anticipation of the bonus receivable successful future. Don't marque the mistake of doing that. What if the institution delays oregon skips the yearly bonus outgo for a peculiar twelvemonth owed to atrocious fiscal show oregon immoderate different reason? Hence, you should walk lone what you have.

You should program the yearly bonus usage lone aft you person it. Rather than splurging the wealth connected the latest gadget, vacation, oregon manner expenses, see utilizing it for fiscal planning. You whitethorn not beryllium capable to fulfil each the supra 7 goals with a azygous year's yearly bonus. However, you tin usage the bonus each twelvemonth to cheque a fewer items from your fiscal readying to-do list. 

Apart from the yearly bonus, you tin usage amounts specified arsenic the income taxation refund, maturity proceeds from a fiscal product, immoderate different windfall gains, etc., to conscionable your fiscal goals. It volition assistance you accelerate your fiscal readying travel and execute fiscal state earlier than planned.

Gopal Gidwani is simply a freelance idiosyncratic concern contented writer with 15+ years of experience. He tin beryllium reached astatine LinkedIn.

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Published: 02 May 2024, 09:39 AM IST