By now your organisation must have handed out the
bonus and increment. If you are one of the few lucky people to receive an
increment and bonus or at least one of the two, it is crucial that you use it wisely
and don’t squander it. Planning your increment and bonus money can help you to
achieve your financial goals and be debt free.
You may have got a single digit percentage hike or
double digit, the percentage of your hike is not of much significance. The
essential part is that you plan your finances according to your bonus and
salary hike. There is no wrong in splurging once in a while but planning for it
will help you to avoid burning a hole in your pocket or regretting about your
Choosing the right way to handle your bonus and
increment is comfortable with these simple steps.
Build an emergency fund:
If you haven’t yet built an emergency fund, now will be the right time to do
so. It is recommended that you keep at least three months’ worth of expenses in
your emergency fund. The emergency fund can help you to tide over any
unfortunate scenarios such as job loss or minor accidents. You can use your
bonus to create an emergency fund. It is essential to have funds earmarked for
emergencies as with emergency fund in place; you will not be tempted to dip
into your long term investments.
While building an emergency fund, it is essential
to park it in a product with the highest liquidity. Savings account and the
liquid fund have the highest liquidity and individuals can redeem money within
minutes. You can keep one-third of the emergency fund in a savings account for
easy access and the rest in a liquid fund. Liquid fund is a category of debt
mutual fund with the lowest risk. Also, liquid funds give a higher rate of
returns than savings accounts.
Start Investing or Increase your SIP amount:
If you always waited for the right time to start
investing or have enough money to start investing, this is the right time for
you. If you don’t have the technical knowledge of investing directly in stocks,
mutual funds would be the best option for you. There are different types and
categories of mutual funds to suit and cater to the various kinds of investors.
No matter how many days or years you want to invest, what kind of risk-taking
capability you have, there is at least one mutual fund for you.
Typically, before investing, you need to list your
financial goals and time horizon. Your financial advisor can help you through
this investment journey. You can invest the bonus amount as a lump sum
investment, and you can set up a systematic investment plan(SIP) with your
monthly increment. It is advisable that at least 20% of your take home salary
should be invested.
If you already have SIPs running, you can step up
your SIP as per your increment percentage. Stepping up your SIP amount
regularly can help you to reach your financial goals faster. If you invested
Rs.5,000 per month for ten years at a 12% rate of return, your corpus at the
end of the ten years would be RS. 11.6 lakh. On the other hand, if you had
increased your SIP by 10% per year, your corpus would be grown to Rs.15.36
You can also invest your bonus in that fund. You
can segregate the bonus equally between the different funds, or you can invest
in a financial goal that you want to achieve at the earliest.
Lessen your debt obligations:
No one likes to live debt, especially when the loan
attracts a high-interest rate. If you are in a journey to cut your debts,
repaying your loans with your bonus can be a move in the right direction. You
can start by paying off your credit card debts and personal loans as it carries
a high interest rate and gives you no tax benefit. Once you pay off these debt
obligations, you can move to the vehicle and home loans.
You can also invest a portion of your increment
towards repaying of the loan. However, before you do that, it is vital to check
the prepayment charges as many banks charge prepayment charges for foreclosing
To summarise,knowing how to maximise
your increment and bonus can go a long way in helping you achieve your
financial goals. Thanks to technology, various facilities such as step up SIP
among others can automatically increase your SIP amount every year by a certain
predetermined percentage. Use your increment and bonus wisely so that your
future you will thank you.
#niveshsimplied #fundvaliz #mutulfundsahihai #investment