Earn nicely, spend wisely

The trouble with opportunity is that it always comesdisguised as hard work and since you have worked hard the whole year, put yourbest foot forward and finally you’ve received the much awaited, annual bonusfrom your company as part of recognition program, it’s quite normal to want, totreat yourself to a little extravagance. This occasional pampering is good foryour overall well-being, but one mis-step and you may not even notice yourbonus money vanishing. Isn’t it that you want to use it in the most rewardingand fulfilling way. Let the extra money help you achieve your life goals moreefficiently and effectively. We’ve heard it so often that “Failing to plan isplanning to fail”. Let me try and explain how to make your bonus money workharder for you.

You know how much you love that phone or have always wantedto buy that bag and now that you have extra cash in hand, going a little overbudget should be fine, Right? Unfortunately that’s not always the case. Youdeserve to reward yourself after putting so much hard work into your career,but you should always try to strike a balance between living for today andpreparing for tomorrow. The rule of thumb is to set a limit to your spending,ideally no more than 30 to 35 per cent of what you’ve earned. I have, in mostof my previous write-ups advocated the importance of clearing off your debtsfirst and if you have a high-interest loan or credit card debt, you ought totake this opportunity to repay as much of the debt as you can. Before you spendyour bonus amount, clear your credit card bills first because paying downcredit card debts at a higher interest rate percentage is a better bet anyway.It’s like having the returns as your savings since you’ll get to save a lot ofmoney by reducing your debts. If you own a home loan, consider paying down alittle extra towards principal to reduce the amount of interest and shorten theloan tenure. The best way to stretch your bonus is to start saving for multiplefinancial goals. Allocating a portion of the money into long-term investmentscan make the money grow faster and last longer. You can also enhance yourretirement investments by contributing as a top up to your existing Equitypension fund/SIP.

   

Self development is a must for everyone and it’s alwaysbetter to make efforts to improve yourself. Just because you’ve achieved yourgoals or reached a certain status in the company doesn’t mean you should stoplearning. Take up a professional course or attend a workshop to increase yourknowledge and skill set. Now is the time to invest in building your personaland professional skills. Another way of spending your bonus wisely is to take apersonal accident, home or health insurance plan. You may even want to enhanceyour protection coverage by insuring yourself. You can opt for a Term insuranceplan, which is easy on your wallet and won’t take away a lot from your bonus.

A few key points that ought to be considered simultaneously,so that you don’t let the extra money from a bonus or commission amount lureyou into going further in debt. For instance, never leave the money unallocatedin your bank account, where it’s likely to vanish very quickly. Don’t Splurgeon lifestyle items or big-ticket purchases, such as an expensive electronicgadget with your credit card in advance of your bonus and expect to pay it offlater. Don’t clear off your student loan first when you still have a personalloan or credit card debts, which carry a higher interest rate. Bottomline hereis that you need to lose all your excuses so that you can find your results.

(Ifthikar Bashir is a freelance Financial Advisor)

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