5 Smartest Things to Do With Your Year-End Bonus

Updated on:  

08 min read

You may get a reward from your company for the work and dedication to the business through an end-of-year bonus. However, you will find many employees squandering this bonus on unnecessary purchases. For example, you may spend the end-of-year bonus on an electronic gadget you don’t need. 

You may feel tempted to spend the end-of-year bonus on a shopping spree or a foreign vacation. However, you can invest the end-of-year bonus for a better future rather than spend it on wants. Let’s take a look at five smart things to do with your end-of-year bonus:

1. Repay expensive loans

You may have availed of a personal loan or credit card debt to fund a lavish lifestyle. It would help to repay this debt with your end-of-year bonus rather than pay the minimum amount due on the credit card. 

For instance, it is pointless investing to earn a decent return if you are repaying a personal loan that charges an interest rate of 15-17% per annum. Moreover, you may struggle to repay the credit card interest of around 24-35% per year. 

You can repay expensive loans with an end-of-year bonus to improve your credit score. It will help if you start investing after you repay costly personal loans and credit card debt.

2. Create an emergency fund

You may use the end-of-year bonus to build an emergency fund. For example, you could invest in a liquid mutual fund, savings bank account and a sweep-in FD to create your emergency fund. 

It would help if you built your emergency fund to meet a financial crisis. You may consider investing in a liquid fund that offers a higher return than a savings bank account. Moreover, you can withdraw your investment within a few days during a financial emergency. 

3. Start investing for financial goals

You can invest your end-of-year bonus in attaining your short, medium and long-term financial goals faster. It would help if you invested the end-of-year bonus to achieve investment objectives depending on your risk tolerance. 

For instance, you can invest in equity mutual funds through a systematic investment plan or SIP if you are an aggressive investor to achieve your long-term financial goals. You can invest the end-of-year bonus in the PPF, NSC, debt funds or bank FDs if you are a conservative investor. 

4. Invest in your career

You can use the end-of-year bonus to take up a career-enhancing skill such as a computer course, public speaking or financial programmes. It helps if you focus on skills that can increase your salary. 

You may also use the end-of-the-year bonus to pursue your hobbies. It could help you grow in your professional and personal life.

5. Get life and health insurance

You may consider taking up a term life insurance plan with your end-of-year bonus if you are newly married. It is a low premium life insurance plan with a mortality cover. It ensures your family has the money to enjoy current living standards on the policyholder’s untimely demise within the policy term. 

You can avail of a health insurance plan instead of depending on employer insurance cover. You have a family floater plan that covers the entire family against hospitalisation expenses during a medical emergency. Moreover, you spend only a tiny portion of the bonus on term life insurance and health insurance premiums.

You may consider the end-of-year bonus as a reward for the employees’ hard work and dedication. However, you must invest the bonus for a secure future rather than spending it on wants. It will help if you spend it on enhancing your professional skills and pursuing your passions. 

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