It is an exciting time for employees of all corporate organisations across the board as it is that time of the year when lengthy performance reviews are finally over and you are finally ready to receive the bonus you have been waiting for! It is always a great feeling to be rewarded for the efforts you have made all year round, and getting some extra cash in hand can fuel many dreams.
However, most people go about spending this lump sum they receive in the latest gizmos and often feel guilty about not having spent it wisely later. To save you from the pangs of guilt here are some tips that you can use to get your financial health in order and in the process improve your credit score are well.
Reduce your debt burden
If you have a large outstanding amount on the credit lines that you have availed of, consider making a repayment in lump sum. Especially if it is outstanding credit card debt, it should be reduced with immediate effect as it not only is the costliest form of debt but also has a detrimental impact on your credit score. By paying off your debt, you can improve your credit score and have the mental satisfaction of having a clean slate. Even if it’s a home loan or a car loan you are servicing, consider a foreclosure or a bullet payment and reduce your debt burden immediately.
Invest with a specific goal
Each year one tends to have a specific financial goal in mind. An admission of school going child may be coming up later this year, it may be a special anniversary year for yourself or someone close in the family or you may have been planning a dream vacation for a long time. Use these excess funds to invest with these specific goals in mind. If you intend to put away your money for a short time of 3-6 months, a liquid fund or an ultra-short term debt fund may give you better returns as compared to keeping your money stashed away in a savings account. If have a specific goal as buying a house that is in the medium term, you could consider a lump sum investment in an equity oriented fund, that will come in handy in few years from now when you will be the checking out the best home loan rates in India.
Build an emergency fund
An essential part of having a financial plan is to build a fund that can sustain you for a period of at least three to six months if life takes an unpleasant turn and you find yourself in a situation where your cash flow comes to a halt. If you have not built up this emergency fund yet, use this excess cash to build this fund right away. An emergency fund must stay liquid and easily accessible so that you can turn to it in a rainy day. Once you have built this emergency fund, make it a habit to replenish it whenever possible.
Save for your retirement
When one is young and happening, one often tends to think that he has enough time to save for retirement. But that notion is actually false, as you need to save for your retirement from the time your start drawing your first paycheck. If you have been neglecting the need for a retirement fund, now is the time to start saving for your retirement. Use the lump sum amount that you get as a performance bonus to start building up or augmenting your retirement kitty.
While it is wise to save the most part of your performance bonus and direct it towards well thought out investments, it is also important to reward yourself for the hard work you have put in all year long. Do use a part of your funds to get yourself something you like, start a new course or just spend it on a treat to your family or friends. In short do something that indeed makes you happy! While money matters must be dealt with in all earnest, it is important to live a life you think you deserve as well, so long as you are not going overboard.
So this year, when you receive a handsome performance bonus, we hope you will use these tips to put your financial health in order. If you implement one or more of these, not only will you end up augmenting your finances, you will also increase your CIBIL score in the process.
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