April is that time of the year that is largely ignored. I say so, because for various reasons it is usually an uneventful month, with no major events, festivals or work pressure that calls for stress.
Although, something pleasant or for some unpleasant happens in the months of April and May, the annual/ bi-annual bonus is declared. For a moment, I am going to stay away from how happy or unhappy we might be with that number, truth being told, we all look forward to this amount reflecting in our bank accounts.
I often see myself discussing with my friends, how they / I am going to use the bonus to take a holiday, buy a new gadget, and buy some jewellery and some such. However, seldom is the discussion point “How will I invest my bonus”. I try to steer that conversation in that direction a few times, and at times make progress.
We are all victims of the bane called “instant gratification”, a moment of impulsive decision making, often financial that leads to feel happy for a very short period. This short period often involves large expenses.
What I am going to give you now, is a bonus cheat sheet, smart ways that you could use this money to make it work better for you.
1.Reduce your debt
The most unexciting part of money, bringing down liabilities, however it makes most sense to bring down those credit card/ personal loan amounts with huge interest portions. We can very rarely find investments that earn us the interest that we pay on credit cards.
2.Create an emergency fund
I cannot emphasise enough the need for such a fund, and almost sound preachy when I say it, but yes! You do need an emergency fund, should this be 3 months or 6 months of your monthly expenses is a number I shall leave for you to decide, and the best instrument for this would probably be, a liquid mutual fund. This puts your money aside and also makes it accessible when you need it, out of sight, out of mind they say! The urge to spend that money will come down.
3.Plan for your goals
Perhaps you have been lagging all this while in terms of achieving your financial goals. The bonus is a good windfall for you to make an extra contribution to your financial goal. This financial goal can be anything from a short-term goal of a vacation or a long-term one like retirement. A part of your bonus should definitely go towards your financial goal.
4.Start your tax saving investments
Tax saving investments is typically made, at the end of the year, in a rush when the we have the date of submission of documents hanging on our head.
A smart thing to do , is to make a start in that direction, this also gives you enough time to analyse and choose the right ELSS product/ Term insurance/ Health Insurance and critical illness policies.
5.Now spend your money
Should you have taken care of one through three, what left of it can be uses to make some purchases that could give you the kick of instant gratification?
It is only by creating a disciplined and consistent pattern of investing that we can expect for our money to multiply many fold.
Like any other behavioral habit, if investing is not practiced well, the outcome may not be what we expect.