Nifty99000 100%

Sensex99000 100%


How To Not Squander Your Bonus?

Author: Viral Bhatt/Wednesday, March 25, 2020/Categories: Exclusive

Rate this article:
How To Not Squander Your Bonus?

By now, your organization must have handed out the bonus and increment. If you are one of the few lucky people to receive an increment and bonus or at least one of the two, it is crucial that you use it wisely and don’t squander it. Planning your increment and bonus money can help you achieve your financial goals and be debt free. You may have got a single digit percentage hike or double digit, the percentage of your hike is not of much significance. The essential part is that you plan your finances according to your bonus and salary hike. There is no wrong in splurging once in a while, but planning for it will help you avoid burning a hole in your pocket or regretting about your decision later. Choosing the right way to handle your bonus and increment is comfortable with these simple steps.

Build an emergency fund

If you haven’t yet built an emergency fund, now it’s the right time to do so. It is recommended that you keep at least three months’ worth of expenses in your emergency fund. The emergency fund can help you tide over any unfortunate scenarios such as job loss or minor accidents. You can use your bonus to create an emergency fund. It is essential to have funds earmarked for emergencies as with emergency fund in place; you will not be tempted to dip into your long-term investments.

While building an emergency fund, it is essential to park it in a product with the highest liquidity. Savings account and the liquid fund have the highest liquidity and individuals can redeem money within minutes. You can keep one-third of the emergency fund in a savings account for easy access and the rest in a liquid fund. Liquid fund is a category of debt mutual fund with the lowest risk. Also, liquid funds give a higher rate of returns than savings accounts. 

Start Investing or Increase your SIP amount

If you always waited for the right time to start investing or have enough money to start investing, this is the right time for you. If you don’t have the technical knowledge of investing directly in stocks, mutual funds (MFs) would be the best option for you. There are different types and categories of mutual funds to suit and cater to the various kinds of investors. No matter how many days or years you want to invest, what kind of risk-taking capability you have, there is at least one mutual fund for you.

Typically, before investing, you need to list your financial goals and time horizon. Your financial advisor can help you through this investment journey. You can invest the bonus amount as a lump sum investment, and you can set up a systematic investment plan (SIP) with your monthly increment. It is advisable that at least 20 per cent of your take home salary should be invested.

If you already have SIPs running, you can step up your SIP as per your increment percentage. Stepping up your SIP amount regularly can help you reach your financial goals faster. If you invested Rs5,000 per month for ten years at a 12 per cent rate of return, your corpus at the end of the ten years would be Rs11.6 lakh. On the other hand, if you had increased your SIP by 10 per cent per year, your corpus would be grown to Rs15.36 lakh.
You can also invest your bonus in that fund. You can segregate the bonus equally between the different funds, or you can invest in a financial goal that you want to achieve at the earliest.

Lessen your debt obligations

No one likes to live debt, especially when the loan attracts a high-interest rate. If you are in a journey to cut your debts, repaying your loans with your bonus can be a move in the right direction. You can start by paying off your credit card debts and personal loans as it carries a high interest rate and gives you no tax benefit. Once you pay off these debt obligations, you can move to the vehicle and home loans. You can also invest a portion of your increment towards repaying of the loan. However, before you do that, it is vital to check the prepayment charges as many banks charge prepayment charges for foreclosing the loans. To summaries, knowing how to maximize your increment and bonus can go a long way in helping you achieve your financial goals. Thanks to technology, various facilities such as step up SIP among others can automatically increase your SIP amount every year by a certain predetermined percentage. Use your increment and bonus wisely so that your future you will thank you.

The author is head and founder of Mumbai-based financial advisory firm Money Mantra. He can be reached at


Number of views (209)/Comments (0)

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free