Source/Contribution by : NJ Publications
India is in a state of Euphoria, celebrations are in the air with one festival lined up after the other, and we just wrapped up the biggest of all, Diwali. For many of you, your bosses/companies have made the festival of lights even more brighter, with the Diwali bonus. We have been looking forward to the festivities as well as the big money coming in, and the topic for today is the latter, the Bonus.
Generally, we are conservative in spending our monthly salaries, but when it comes to sudden inflow of money, we become liberal. We plan things around this jackpot, we treat our friends and family with a grand bonus party, followed by owning our desires, the new DSLR, the latest I-phone, diamond ring, Goa vacation, etc. So, soon after the bonus money lands into our accounts, it's blown in the air, most times serving no constructive purpose. So, it's this general approach towards bonuses, that prompts us to write this piece.
One central characteristic of money is its fungibility, the value of Rs 1 lac remains the same, irrespective of the source. So, whether Rs 2,000 is from your salary, or whether you found the note on the road, both carry same value, and can get you stuff of equal value. Taking the fungible nature of money at the core and also the fact that bonus is a big amount which you don't get routinely, we are sharing some tips which can help you make the most of your bonus.
1. Repay your Debt: The heaviest burden you can carry on your shoulders is the debt burden. Since you do not get a bounty in addition to your monthly salary every month, you should put this to good use, you can use it to significantly cut your debts. Begin with credit card bills and personal loans, since these carry massive interest rates, so a lot of your money is wiped away every month in interest payments. You can even consider offloading some of your other commitments, like home loan, car loan, etc. So, use the bonus wisely, throw the debt off, so that you can walk free.
2. Create or Contribute to your Emergency Fund: We need at least 6-8 months of our income handy at all times, to protect our shell during financial distress. There can be periods of less income or even no income, like in case of job loss, job switch, emergencies not covered under insurance, etc. You need money to survive, provide for the basic necessities in such situations, which calls for the need to have an adequate emergency fund. In case you don't have an emergency fund or it is inadequate, you must use the bonus in this direction.
3. Invest for your goals: According to Hindu mythology, Diwali time is a good mahurat, people try their luck in cards, lotteries, casinos, hoping to make big gains. But you must remember that luck is two-faced, sometimes it's on your side, sometimes not, hence you should stick to fundamentals and focus on long term wealth creation. Invest your Diwali bonus in your future, since the bonus is a big amount, it will be a big leap towards your goals.
4. Pursue your Passions: The football club you always wanted to join, the horticulture course you want to do, the music class you have been postponing, or a professional course you want to do which is going to accentuate your profile and help you grow in your career. This bonus is an opportunity to invest in yourself, which is otherwise difficult to manage from the routine income.
5. Don't let the bonus sit in your Saving Account: Some of us might have planned about how we are going to spend the bonus, while others are yet to decide the outlay. So, for those of you who have the bonus lying in their saving account with no intended immediate use, it is advisable that you shift it into a Liquid Fund. It will serve the dual purpose of yielding better returns for you than the saving account, plus it will protect the money from you, for you might end up ravaging a part of your bonus by casually swiping your debit card.
To conclude, The Diwali bonus is no lottery, it's the reward for the hard work that you have put for an entire year. Don't splurge it, rather employ it in a way so that it is able to make a difference. The above were few avenues which you can allocate your Diwali bonus to, as your contribution towards a brighter future.