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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:
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.
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.
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.
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.
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.