The Diwali season is upon us, and we are hoping for the best things to come our way, including a Diwali bonus.
We all know how far a few extra wads of money can go. But when we receive it, we indulge mostly in making some extravagant purchases during Diwali time. But let’s spend the Diwali bonus differently this time.
The last few months have taught us all a crucial lesson that is surviving through a pandemic. We all have witnessed how hard it has hit the economy. Hence, we have decided to share some Diwali bonus investment tips, which seem prudent under the current circumstances.
Firstly, a bonus is a windfall of money, in addition to your monthly salary. If used in a disciplined manner, such a lump sum will come in handy during the rainy days.
Find out how you can use a Diwali bonus more efficiently.
Go Debt Free
The first step to achieve financial freedom is to live debt-free. Debts, if left unattended, spiral out of hand and upset your financial plans. If you have any debt, be it credit card outstanding, EMI, or ongoing loan repayment, try to clear it out. You will see that you can save a significant amount that you were spending on interest payments. For example, banks charge between 36-48 percent on credit card outstandings. Hence, if you are only paying the minimum dues, the bank will make you pay a hefty amount on interest. It will dent your credit score. So, when you receive the Diwali bonus this year, try to pay off your loans to reduce the burden.
Tuning Your Investment
When you get some extra money, always invest. You have received the bonus for all the hard work you have done during the year. Now, you can use it to fix the gaps in your investment.
Most of us invest to achieve long-term goals, like retirement, buying a house, or children’s education. But in the continuously changing economy, it has become a difficult task. But if you plan to use any surplus amount in a disciplined way, you can meet the shortfalls in your investment plan with it. The surplus will accelerate your growth to achieve the goals.
How to invest bonus money
When we say that you need to invest, the next question arises: where and how to invest bonus money. There are a couple of alternatives available. Depending on your immediate financial goals, you can invest in various short-term or long-term investment plans and opt for a flexible investment mode.
Ideally, one should invest 30-40 percent of the bonus sum based on his future objectives.
If your immediate objective is to save for a foreign vacay or making a down payment for a house, debt funds are a good option. These funds add liquidity to your investment and offer guaranteed returns after the term ends.
For long-term goals, however, you can invest in a diversified portfolio, such as equity funds, which have the potential to generate good returns in the long-run.
Equity funds invest principally in stocks that allow you to invest in various company shares, categorised based on company size, investment style, and things like that.
Alternatively, you can also start investing in the share market. Historically, stock investment has generated the highest return among all asset-classes.
Some people think you need to make a considerable investment in the stock market to start, but nowadays, you can begin with SIP style investment plans that allow you to invest small but regular amounts in the stock market. This style of investment works best for investors who don’t follow market movement regularly. It works like a general SIP, where NAV units get allotted every month based on investment amount and market condition. Since they invest in all weather, the funds generate a better return by eliminating market cycles’ impact.
Now that we have discussed how to invest bonus money, you can go ahead and start planning your finances. However, don’t forget to enjoy yourself with your family. A little bit of spending is also necessary to enjoy life better.