Rajeev was eagerly waiting for this time of the financial year. All his hard work and tedious stressful tasks have now paid off in the form of a Bonus. He sensed a feeling of great happiness with every bonus. He was excited to finally execute his plans like a foreign trip with his wife.
Seeing that money appear in his bank account, Rajeev had a strong urge to spend the amount. However, he then realized that he also had his long-term goals waiting for him. He took a few moments and chalked out a plan. While it may not solve all his problems magically, a bonus can definitely ease things along.
Here is a list of guiding principles that can help in apportion the bonus money;
Pay off debts:
Any outstanding debts like credit card, personal loan or home loan can be paid using the bonus to reduce the debt significantly. Why waste money on paying heavy interest amounts? It is advisable to take debt reduction as a top priority. The general thumb rule would be to direct at least 30% of the bonus to clear debts.
Take a Break:
A bonus is a pat on your back for all the hard work! Up to 10% to 20% of the bonus amount can be used for a relaxing holiday it is recommended to limit expenditure on holiday to a maximum of 20%. This will help in using the bonus for other important things.
Invest for the Future:
If invested correctly, the bonus amount can make a lot more money.
Since the bonus is flexible in nature, consider opting for annual premium plans which only require paying the premium once a year. ULIPs are a good option when it comes to wealth creation for long-term goals and saving tax. 50% of the bonus amount should be invested to extract maximum benefit.
Just like how Rajeev chalked out a plan, you can also do the same depending on what you want from life! How much you invest is in your hands, but it’s essential to do so every time you get a bonus.