4 Smart Ways To Spend Your Diwali Bonus
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29 Oct, 2018
With Diwali around the corner, Gautam, a 27-year-old analyst cannot decide whether he is more excited about celebrating with his family and friends or going on a shopping spree with all the online shopping websites raining discounts. He is expecting his first Diwali bonus and he has a list of things to buy ready.
When he enthusiastically shared his plans with his senior, his senior warned him, “Don’t make the mistake I made with all my initial Diwali bonuses. I blew up all my money and regretted it for the rest of the year”.
If like Gautam, you too had planned to spend your entire Diwali bonus, read on –
Saving for your future requirements and brighter future are of great significance, but all the hard work you put in through the year to earn the Diwali bonus, deserves some indulgence as well. Set aside 10-20% of your Diwali bonus for your self – buy that beautiful saree for your mother, the expensive toy your child has been eyeing or some new clothes for yourself for all those family get-togethers and Diwali parties! Or you could take a weekend stay-cation in the nearest 5-star hotel or buy the latest phone you’ve been tracking the price of – after all you deserve to enjoy the Diwali bonus!
Once you have set aside some money for yourself, it is time to be a smart investor and utilise your Diwali bonus in such a way that your Diwali and the coming year is filled with Happyness, Health and Wealth.
- Pay off existing dues
- Ensure you and your family are adequately insured
- Invest towards long-term goals
- Invest in Tax-Saving Instruments
Nowadays you can purchase anything with an EMI facility – be it a car, a house or a mobile phone. While these EMIs seem very achievable, most people tend to oversee the rising interest rates and the impact on EMIs. Prepaying or paying off outstanding loans when you receive your Diwali bonus can be very helpful to reduce your interest burden. Not only will this help you save more money in the long run but will also help increase your CIBIL Score. While prepaying a loan may involve a small charge, letting the interest build over the years will cost you more. To make the most of prepaying a loan, you should keep the EMI same but reduce the tenure of your loan.
With increasing medical expenses and stressful lifestyles, it has become important to insure health adequately. You can use your Diwali bonus to buy a new health cover or increase the cover on your existing policy and ensure your loved ones are healthy and happy for years to come.
You can also utilise your Diwali bonus to buy a Term Plan or boost your existing life insurance plan for more coverage. A Term Plan is ideal as it serves the purpose of life insurance – ensuring your family is taken care of in your absence. After all financial security is the best gift you can give to your loved ones on this festive occasion.
Instead of splurging on fancy Diwali gifts, endless shopping sprees or boxes of firecrackers, why not gift your loved ones and yourself a priceless gift – a happier future? A health corpus for your parents, a good education for your children or a peaceful retirement for yourself – these important life goals lose out to day-to-day expenses and short-term goals. Your Diwali bonus is the perfect opportunity to start investing or increase your savings towards these goals. With the markets being at a low, this is the perfect time to make investments. Since these goals are long term goals, you can invest in Equity Mutual Funds that will help your money grow and ensure you achieve your goals. You can either increase (top-up) your existing Mutual Fund investments or you can make a fresh lump sum investment. Alternatively, you could invest in a Liquid Mutual Fund and opt for a Systematic Transfer Plan into an Equity Mutual Fund to spread your risk.
Instead of scrambling to invest in tax-saving instruments in February and March, invest your Diwali bonus in an Equity Linked Savings Scheme (ELSS). Investing in ELSS not only helps you save tax but also helps you build your wealth. You will thank yourself when you are not running behind your Chartered Accountant or HR team in office to ensure you ‘save tax’ at the end of the financial year – a prosperous New Year indeed!
Follow the above guidelines, and unlike Rahul’s senior you will not have any regrets about your Diwali bonus. Your Diwali will be a Happy Rich Diwali!