Spend Your Annual Bonus Wisely

Spend your annual bonus wisely

Annual Bonus is a very important component for any working professional. Normally, every individual has his own plans on how to spend it before it hits your salary account. But there are a few people who don’t know what to do with this extra money and where they should

· Spend

· Invest

· Save

Normally professional in the mid 20’s spend it on luxuries and later on repent on it “I should have invested it somewhere” This is how you can spend your annual bonus wisely and stay ahead of others in financial planning

1. Invest in Mutual Funds to create wealth

Investing in mutual funds especially equity mutual funds helps in creating long term wealth by diversifying in 3-4 schemes. You must consult your financial planner (not sales agents) before you plan out for your future. Mutual funds have historically given a return of 15-18% which can make your money 27 times in 20 years considering 18% rate of return. This means if you have received a annual bonus of 1 Lakh, it can become 27.85 Lakhs considering 18% rate of return and 20 years of time period, the money which will need at your retirement or for your child’s marriage. SIP in Mutual fund is an another way to create a huge corpus for your future needs.

2. Prepay your Expensive Loans

In case you are holding any personal loans or credit card debit account, you must pay them first. Never delay expensive loans as it can disturb your whole financial plan. Credit cards sometimes act as a debt trap as nearly 35 monthly interest can hit your badly

3. Tax Planning

You can look to save tax through various deductions under various sections. You may invest your bonus amount in Equity linked savings scheme (ELSS) or in PPF or some other assest class which may help you to save tax upto 1 Lakh under Sec 80c. By this you can save your tax and take the benefit of power of compounding in your investments.

Now its upto you whether you want to save, invest or spend your annual bonus

This article is written by Mr. Mayank Gupta who blogs at www.wealthbazaar.in which is into portfolio advisory services and financial planning