Received Your Incentive?

It's that time of the year when most companies will be treating their employees with their annual bonus for their year long hard work. Some of you might have already got the big credit in your accounts, while others might be in the “guesswork” stage, trying to figure out the bonus amount and hoping your boss does not count the number of uninformed leaves you took, or the number of times you came in late.

So what are you going to do with this bonus?

Buy a Phone, throw a Party, buy Clothes, go for a Vacation, or are you going to do something prudent?

The worst you can do is squander away your bonus, the reward for a whole year of slogging is ruined. The company has paid to you, now it's your turn to pay to yourself. So, what should you ideally do? How do you bonus put your bonus to good use?

So the following passage will guide you about managing your bonus effectively so that you maintain a balance between gratifying your desires as well as contributing to your future.

Spend Prudently: We at times end up blowing our hard earned bonus on stuff which we might not have otherwise purchased/needed. Buying an I phone X worth Rs 1 Lac, while you bought a new One Plus 5 six months back, just because you got your bonus, doesn't make much sense. The bonus temporarily increases the size of our pocket, but you must remember that it is your hard earned money, buy something that you really need and afford. Spend your bonus wisely.

Reconsider Investing in Gold: Many people buy gold jewelery/coins from their bonus, as an investment for their future. But the fact is, buying a gold chain may not be a very good investment. Firstly, because the return stats of gold over the past few years aren't very promising, and the future prospects are also not clear. High making charges further accelerate the cost of the jewelry. And lastly, you will most likely never sell it in times of need, because of the emotional value attached. Hence, you must be careful about how much gold/gold jewelery you want to buy. If you are looking to invest, look for better options having a greater return potential and are easy to liquidate.

Don't let it be in your Saving Account: Bonus is a big thing, it is ideal that you give a good thought for deciding its outlay. Till the time you decide the outlay, you can park the money in a liquid fund or an arbitrage fund until you find peace with an investment option. The twin benefit of not lying in your saving account is: it won't vanish with your routine expenses, plus you'll get a better rate of return.

Consider Loan Repayment: Because you normally don't have such huge cash at your disposal, it's a good opportunity to lighten your shoulders by offloading your loans. Normally, when you pay your EMI's, a significant portion of the installment goes towards interest repayment and the remaining towards principal. However, if you make an early repayment, it will be a part of Principal repayment, thus reducing your interest burden over the long term.

> Create/Add to an emergency fund: Your Emergency Fund needs to be reviewed and revised from time to time to incorporate your increased income and elevated lifestyle. So, your annual bonus also offers a good chance to upgrade your Emergency Fund.

> Invest for your goals: A great option that you can consider for your bonus disbursement is invest your bonus for your goals and make your bonus work for your future betterment. Fix a meeting with your Financial Advisor and review your financial plan and allocate your bonus to different investment products in accordance with your financial plan.

To conclude, your bonus is the reward bestowed upon you for your year long hard work. Use it in a way that you appreciate your decision later. You can explore any or a blend of the above or any other option that you may deem fit. Also, do not forget to celebrate the arrival of the bonus, go for a dinner with your family or friends, or plan for a weekend getaway, rejuvenate yourself, because another year of challenging your capabilities has made its way.

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