Diwali bonus is usually awaited during this period, with spendings lined up even before the festive season begins. Some of you might have already received your Diwali bonus, while others may be expecting it a few days before Diwali.
Though you might be tempted to blow it up immediately on a shopping spree and dining out during the ongoing festive season, but it’s better to use the money wisely as it’s not every month that you get an extra lump sum.
Though it is termed as a “bonus”, it’s your hard-earned money for which you’ve worked throughout the year. Hence, besides enjoying the festive season, it would be wise to utilise your Diwali bonus sensibly.
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Nobody is stopping you from indulging in a bit of festive cheer but striking a balance can make all the difference. Let’s find out ways by which you could make use of your bonus wisely.
Pre-close Your Loans
If you have ongoing liabilities, it is ideal to use the lump sum amount to pre-close your loan(s). You need to target your unsecured loans such as personal loans and credit card dues, if any, first and then focus on secured loans such as home loans to reduce the interest burden.
Says Rishad Manekia, founder and managing director, Kairos Capital, a Mumbai-based financial planning firm registered with the Securities and Exchange Board of India (Sebi): “RBI has increased policy rates significantly in the last few months and consequently interest rates on loans have also gone up. If you have any outstanding loans, especially expensive loans like personal loans, credit card outstanding and so on, you may use the Diwali bonus to pay-off these loans completely or partially, whatever possible.”
Make Full Payments
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“If you need to buy or replace any electronic gadget/item at home, you should avoid falling into the trap of ‘no-cost EMI’ or ‘zero-cost EMI’. Rather, you could utilise the bonus amount to fund the purchase at once,” says Arijit Sen, a Sebi-registered investment advisor and co-founder of Merry Mind, a Kolkata-based financial advisory firm.
There may be several offers in the market, and you may be tempted to buy multiple items on multiple loans, but it makes sense to assess your repayment capacity first and settle for the one that you can fully afford.
Start Building A Contingency Fund
For many people, it becomes difficult to keep aside funds from monthly salary to build an emergency corpus; for them, bonuses can be a way out. Ideally, one should have an emergency corpus equal to six months or a year of expenses.
“In case you do not have sufficient contingency fund in place or you have utilised some amount from your contingency fund during the year, you may park the lump sum amount in a suitable debt asset as your emergency fund,” says Sen.
Set Aside For Short-term Commitments
If you are planning to buy an asset such as a home or car, setting aside the lump sum can help you set aside the down payment. You could also save for short-term goals such as holidays or funding a course. Short-term financial commitments like investing in an apartment, repairing or renovating your house can also be considered.
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Give Your Long-Term Goals A Kicker
Bonuses can be a good way to boost your long-term savings for goals such as children’s education, retirement and marriage. Your bonus could also fix the gaps in your long-term investments and help you save a surplus.
