While it’s all good to use some of your year-end bonus for celebrations and holidays, it’s smart to set aside a chunk for meaningful investments or to eliminate debt from your portfolio.
As December 31 inches closes, the year-end bonus is on its way for many of you. End of the year calls for splurging but you don’t want to be going overboard with it. While it’s all good to use some for celebrations and holidays, it’s smart to set aside a chunk for meaningful investments or to eliminate debt from your portfolio. Here are some tips you could use to make best use of your hard-earned money.
Opt for pre-closure or prepayment of loans
You can always use your surplus money to prepay off a part of your loan. This will reduce your EMI burden and get you debt-free faster. It will help you preserve your credit score and allow you to focus on investments.
Build A Cash Reserve For Emergencies
The next thing in line would be to build an emergency fund to financially safeguard you and your family from any unforeseen circumstances such as a health hazard or a sudden job loss. If you already have a fund in place, you can always use the surplus money to beef up your existing fund. An emergency fund should be worth your salary of six to twelve months, which can be used as an alternative for your income in case you were to be out of action temporarily.
Invest In A Lucrative Savings Scheme
If your debts are taken care of and you have an emergency fund in place, you can put in your money in investment assets to build wealth and combat inflation. You can choose your assets basis your financial goals, risk appetite and the time you have in hand to attain your goal. Fixed deposits, PPF and mutual funds are some of the investment instruments you can look at for high returns over a horizon of five years or more.
Top Up Your Insurance
The tax season is about to set in and if you were thinking of adding an insurance to your kitty, don’t wait till the last minute. Use your bonus to boost your insurance coverage. Assess your requirements and buy an appropriate cover using the surplus cash. Healthcare costs are only going up with time, so it’s only prudent to arm yourself with the right cover.
Last but not the least, take stock of your aspirations and contribute a part to each of the goals to attain them sooner than expected.
(The writer is CEO, BankBazaar.com)