Several companies announce yearly bonus for employees based on their performance as well as employees? contribution. This lump sum money should be used judicially to enhance financial condition rather than using it for buying gifts or taking a vacation. Contrary to popular belief, it is quite a trying task to plan out the expenditure of surplus funds when they are actually received. Here are some tips, which will help to plan out the expenditure so as to make the most of it. The exact plan will depend on a person?s financial condition but these guidelines will certainly provide insights into the more efficient ways to use this money.

Save to buy property

Saving bonus money will not only help in buying a right property in case a good opportunity arises but also makes purchase of property easy. Initial 20% promoter contribution is required before applying for a home loan. This amount itself is quite a bit, considering the prices of real estate, and also due to the fact that extra money is needed for stamp duty, registration charges.

Home loan prepayment

Bonus money can also be used to pay up a part of an outstanding home loan. Though home loans carry lower interest rates, they can still drain your finances. Paying off a portion can reduce that burden.

However, make sure that the EMI remains the same but the paying term or tenure is reduced through this prepayment.

Keep funds handy for emergencies

Ideally, a corpus of about half a year?s salary is a good amount to keep as an emergency fund, which can be relied upon in times of urgent financial need arising out of unforeseen circumstance such as a loss of job, car repair, and home repair or health conditions that require medical care.

Invest in SIP

Keeping the volatile market conditions in view, SIPs (systematic investment plan) are the best investment options for the average investor who does want to take risks. Starting an SIP in equities can yield decent returns over a long period of time. The smartest means to use this lump sum amount is to acquire debt funds with the amount and then start a SIP for equity funds with the same mutual fund company.

Enhance insurance cover

The right amount of insurance cover that will cater to the needs of your family is a fluctuating figure depending on various external factors. When you get a bonus, it is the ideal time to review the cover and buy fresh cover with the surplus money in case you feel that the existing cover is inadequate.

Acquire gold

Gold is one of the safest instruments of investment. Bonus money can be utilised to acquire gold either in form of jewellery or as coins.

Get a smarter car

The cost of maintaining petrol cars has become unbearable. CNG is a smart option but availability of funds is one of the main constraints in not changing your existing car to CNG. Consider the option of getting onto CNG mode with extra money that you may have as bonus.