7 Smart Ways to Spend your Annual Bonus Wisely

Along with the happiness of getting the annual bonus, which we all wait for eagerly, comes the worry—the worry on how to spend it wisely. While most people advise you to save that income, your friends and colleagues might want you to end up on a trip with them. While your parents may suggest you to buy a life insurance plan or invest it in SIPs. Isn't it just fair to spend it, though? It's extra income anyways. Here is where most of us tend to loosen up and end up making a huge mistake. Why not find a way to let your fun and savings mutually co-exist?

Here are 7 smart ways to spend your annual bonus wisely

1. Pay your credit card and personal debts - Most of us might have an amount in debt that we might not have paid off yet. Be it that three percent debt from the credit card or an amount of five hundred rupees that you owe your friend from that lunch date. This is the first thing that you must consider to close on. On average, the interest rate per annum for a credit card is over forty-one percent.
2. Purchasing an STP- Investing a large sum of money into an STP might be the next thing that you can consider. This scheme comes under the sector of equity funds.
   • 6 Saving and Investment Schemes to Invest in
     • Monthly investment plans- Monthly investment plan helps you invest per month. The usual interest rate offered by banks is seven point five to nine percent. Generally, banks issue this percentage to a saving of up to fifteen lakhs for five years. The critical thing to note here is that this plan isn't exempted from any taxes. This amount is considered as your income.

       Learn about a monthly income scheme: Overview, features and benefits

     • PPF, a.k.a. Public Provident Fund - This is the safest option, with a lock-in period of fifteen years. An individual needs to add a minimum of five hundred per month to a maximum of one lakh in a year to this fund. It is capped at a maximum of fifteen lakh. The interest rate is eight point eight percent. Not only is this plan exempted from taxes, but as a bonus, the interest is also calculated compounded every year.
     • National Saving Certificate- A self-employed person can easily buy this certificate in one instance and quickly deposit money as and when he or she has an additional income. The interest percent is as high as eight-point eight to eight-point nine, depending on the tenure.
     • Mutual Funds - Non-Banking Financial Companies offer a variety of funds that helps investors to fulfil their needs. You can take money out after the completion of 3 years. The redemption amount will be exempted from taxes.
     • Long-term investment stock accounts -  A long-term investment stock accounts for an organization that plans to stay on for a minimum of a year like stocks, bonds, land, and cash. Long term investors are typically willing to require additional risk for higher rewards. These are different from short-term investments; that area unit is meant to be oversubscribed for a year.
     • Infrastructure bonds - Infrastructure bonds are unit borrowings to be endowed in government-funded infrastructure that comes inside a rustic. They're issued by governments or government authorized Infrastructure firms or Non- Banking financial firms.
3. Build emergency funds - Your best friend- Use a percent of your bonus to form or enhance your emergency fund. An associate emergency fund isn't meant to offer you excellent returns; however, it's a fund that improves your risk appetite. This can allow you to take more considerable risks in your business and your career. There's no fast rule for the quantum of the emergency fund; however, you ought to ideally have half-dozen months of expenses coated.
4. Buy the best life insurance policy - Not having the best life insurance plan in your investment portfolio is fateful. In contrast to investments, luck plays an even more prominent role here, and it does not provide too many probabilities to urge it right. Other than that, as you know life is unpredictable, hence, having a life cover is beneficial for your loved ones. If you are the sole earning member of your family, you need to buy the best life insurance plan for your safety as well as for the financial safety of your dependants. Also, you can invest in savings plan. They are a combination of life insurance plan and saving plan. With Guaranteed Income4Life from Canara HSBC Life Insurance, you will get guaranteed benefits to secure your financial tomorrow.
5. Allocate a part of it to your retirement and your child's future - You must be sure enough to design out your retirement and your child's future through numerous investment schemes. The bonus could be a reasonable chance to spice up your corpus creation. For instance, you'll be targeting to form a corpus of fifty lakhs for your child's education ten years from now.

   However, if you add a booster from your bonus, you'll either have the text corpus or check up on reducing your monthly allocation. These square measure belongings you have to be compelled to target. Start planning for your retirement as early as possible to build enough to support your post-retirement lifestyle. The sooner you start, the better it is.

   Understand how saving at an early stage can help you with retirement?

6. Prepaying home equity credit- Using bonuses to pay the house loan is pretty common. However, there's no need to be compelled to go overboard.

   One should think about the chance value of prepaying the house loan. Therefore if some investment opportunities will provide a higher return rate than the loan rate in the future, then there's a case for investing the bonus cash than prepaying the house loan.

   The money endowed is towards mid-and long money goals (like children's education, retirement, etc.). However, the choice will vary from person to person.

7. And in the end, have fun -Remember, it is a bonus. Therefore you ought to pay for it too and not feel guilty regarding it. Take a little vacation or create that purchase you have been procrastinating. However, do not go overboard and detain mind all the opposite points mentioned earlier.

   An investment in yourself can never go wrong. You can invest in taking up the gym or the dance class membership. Or, you can take up courses which will help you enhance your skills. You can even invest in a good pair of blazers or shoes.

   After everything that we have discussed, remember, it is your bonus, and you have earned it. Spending your bonus wisely can help you secure a stable financial future even in the time of crisis. No one is asking you to miss out on the fun. But having fun at the cost of your financial well-being is a big no. Therefore, plan a strategy before you start spending the bonus you have received.