5 Smart ways to utilise your bonus money

The beginning of a new financial year brings with it the possibilities of appraisals, increments, and bonuses. While receiving a handsome bonus or increment can be an exciting experience, it’s of utmost importance that the cashflow is utilised wisely. While some choose to splurge on luxury items, such impulsive buys can exhaust the bonus amount in no time. Hence, it is important to choose smart options to utilise the bonus in ways that can improve one's financial condition in the long run.  

Here we will explore some prudent ways in which the bonus or salary increment can be utilised — 

Pay off high-interest debts

One must always look for ways to reduce their debt burden. In this regard, the lump sum bonus can be used to pay off high-interest debts like credit card debt, personal loans, or prepay any other outstanding loans. High-interest debts can be a significant drain on finances, and paying them off can help save a considerable amount of money in interest payments. 

Build an emergency fund

Having some savings tucked away for the rainy day is absolutely necessary, but with the rising expenses it can become tough to do that. A lumpsum bonus can be just the perfect opportunity to start or boost an emergency fund. A contingency corpus is an integral part of every individual’s financial plan as it can provide the safety net in case of unexpected expenses or job loss.

Invest in a retirement account

Investing in a retirement account, such as National Pension System (NPS) or Public Provident Fund (PPF), can help one secure their financial future. One can opt for PPF investments for a fixed income part of portfolio and invest in NPS for market-linked returns. Utilising the bonus amount to contribute to retirement account can be a very prudent decision indeed.

Invest in career enhancement

The bonus amount can also be used to enhance one's career and future. The money can be utilised to take a course or training program that can help improve skills and advance career prospects. This can also increase one's earning potential in the long run, leading to a higher salary and better financial condition.

Save for a down payment

In case one's planning to buy a house in the future, then a lump sum bonus can be used to save for a down payment. One must always remember that a higher down payment leads to lower EMIs and saves thousands of rupees in interest payments over the course of loan tenure.