Smart Ways to Use Diwali Bonus: Diwali is often a time when many employers give out festive bonuses. As tempting as it may be to spend this bonus on festive shopping, there are smart ways you can utilise this additional income to serve you better. From prepaying your loan to upskilling, here are six smart ways to make the most of your Diwali bonus.
Boost your emergency fund
Emergencies like a job loss, sudden medical expenses, or unavoidable home repairs, happen unannounced and if you’re unprepared, can destabilise you financially. This is when an emergency fund can be an indispensable in helping you cover the necessary expenses without having to dip into your savings. Your bonus can come in handy to help you start an emergency fund or boost your existing fund. In either case, aim to accumulate a corpus that can cover at least 6-9 months of necessary expenses, such as rent, utilities, groceries, transportation, and other bills. If you have a stable job, aim for a fund that can cover three months’ worth of living expenses.
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Increase your SIP contributions
Mutual funds are a popular investment to achieve long-term goals. Regularly increasing your SIP investments is an effective strategy to reach your financial goals faster. So, if you don’t have outstanding bills or debts, it would be financially prudent to use your Diwali bonus to boost your SIP contributions.
Enhance your health insurance
With medical inflation on the rise, healthcare costs are increasing each year. This is why having adequate health insurance coverage is now a necessity. If you aren’t insured, use your Diwali bonus to purchase a comprehensive health insurance plan for yourself and your family or top up your existing coverage by adding riders like critical illness or maternity benefits, depending on your needs.
Boost long-term investments
If your income and expenses are well-managed, consider using your bonus for long-term investments. Equities are often favoured for outpacing inflation in the long run, making equity mutual funds a strong option for meeting long-term goals. For a shorter duration of up to three years, consider less risky alternatives like debt mutual funds or hybrid funds. However, avoid lump-sum investments in mutual funds to mitigate the impact purchasing during a market peak.
Prepay your loan
If you’re looking to lower your debt, prepaying even 5% your loan is an effective strategy that can help you achieve that. In this case, your Diwali bonus can come in useful. Alternatively, you can also use your bonus to boost your EMI payment or make an additional EMI payment to lower your loan tenure. However, if your interest rate is very high, evaluate your finances and consider repaying your entire loan.
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Upskill
Upskilling can add significant value to your personal and professional life and set you up for greater success. One way to do that is by utilising your bonus to enrol in a course relevant to your field that will help you stay up-to-date with industry trends and expand your skill set that gives you a competitive edge in your career.
Making smart choices about how to use your festive bonus can help you improve your financial well-being and enjoy the festive season while progressing toward your financial goals.
