Karan is on cloud nine! There is nothing better than a cracking appraisal that validates all the hard work he puts in at the workplace. The cherry on the top is the fat bonus. Seeing that extra credit in the bank account has Karan all revved up and ready to go for the new business year?
While Karan is going to enjoy the fruits of his labor with a well-deserved short family vacation, he knows that for actual financial success, his money needs to work just as smart and hard as he does. The lion's share of Karan's bonus this year is going towards buying a strong retirement plan.
Like him, if you too have been rewarded for your performance, go ahead and splurge a little, you deserve it. However, utilize the rest of it wisely. Here's how:
Getting out of debt should be a priority whenever you find yourself with some extra cash. High interest rates and laborious tenures can really play havoc with your finances.
Priorities loans basis the interest obligation. So, if you've racked up heavy credit card bills or have personal loans to repay, they should be at the top of the repaying list
Alternatively, try paying off other smaller loans that your bonus can service in its entirety, like a car or educational loan. It allows you to save a significant amount on the interest cost. So, tick it off your list.
Life Insurance is an absolute must for securing your family's financial future. While your salary and lucrative bonus allow for all the luxuries of life today, the same can be compromised in the event of an unforeseen circumstance.
A comprehensive insurance, like the iSelect term plan offers coverage that will ensure your family's needs are always provided for and dreams fulfilled. It provides all-round coverage with multiple pay-out options to meet your family's diverse needs.
Preparing for contingencies is one of the key pillars of strong financial planning. While we are in a secure place today, tomorrow is a different day we know nothing about. Any kind of medical emergency or financial shortfall can throw your finances and goals in disarray.
It is recommended to have about three to six months of your take-home salary put aside for a rainy day. Look for a good liquid deposit or debt fund that will nurse your capital till the need arises. Even a part of your bonus allocated towards the emergency fund will offer peace of mind and can be invaluable in the times of adversity, hopefully without impacting your other financial milestones.
One of the finest investments you can make is in yourself. Use the bonus to enroll in a certificate course, business conference or invest in learning modules and books that will help you enhance your skills. Further, your professional goals.
Alternatively, seek out enriching experiences that will aid you in becoming a better version of yourself. Pick up that photography equipment that will finally let you explore your passion for capturing moments or the musical instrument that will help you unwind after a long day or a fitness membership as an investment in good health.
A bonus presents a great opportunity to lay a stronger foundation for your long-term wealth building goals
If you are looking to make a substantial purchase in the future or are already servicing one, like a house or car, capitalise the receivables by investing in a balanced investment plan. This can significantly shorten the horizon of repayment and debt
On the other hand, you can play smart like Karan and fast track your retirement goals. Investing early allows you to choose more aggressive investment options that will weather out economic and financial vagaries over the long-term and can really boost your retirement milestones.
Go ahead and earmark some of the funds for you to splurge and enjoy but remember to move quickly with your deployment plans. Don't let the money sit idle for too long in your account. It would else all be spent and unaccounted for before you know it.