You know the feeling of great happiness that comes with every bonus? How excited you are that you can finally take that foreign trip with your wife and kids? Or get your parents’ a 50th wedding anniversary gift they will never forget? Yes, getting a bonus is always a cause for a celebration- a pat on the back for your talent and success, and an opportunity to make some dreams come true!

Seeing that money appear in your bank account gives you a strong urge to spend and it can be hard to control your excitement. However, to make your bonus count, it’s always advisable to think clearly for a few moments and chalk out a plan. While it may not solve all your problems magically, a bonus can definitely ease things along. Here is a list of things that you can do with your bonus. While you are the best judge of how to spend your money, we have provided some guiding principles to help you apportion your bonus money.

Debts Come First

Let’s start with a simple question—do you owe any debts? Credit card? Personal loan? A loan borrowed from a relative? Using the bonus to reduce your outstanding debt significantly is always a smart idea. Why waste money on interest payments when you have your own free cash at your disposal? You may choose to stick to your EMI schedule and wish to utilize your bonus differently. However, it is advisable to take debt reduction as your top priority. The general thumb rule would be to direct at least 30% of your bonus to clearing debt. The goal is to rid yourself of debt as soon as possible! Again, the percentage can vary depending on the amount of your debt.

Take a Break

Use your bonus to take a long and relaxing holiday with your friends and/or family members. Treat yourself to a luxurious experience and return with renewed enthusiasm. It is recommended to limit expenditure on holiday to a maximum of 20%. This will help allow you to use your bonus for other important things mentioned further in the article.

Make that Purchase you’ve been putting off

How about purchasing fancy things for your family? Perhaps you’ve been waiting to get that home-theatre that you know your family deserves. Or that beautiful necklace you know your wife would love to own? Watching your loved ones enjoy the rewards of your hard work can be a very satisfying experience. Though one can’t put a price on such gifts, we would recommend limiting indulgences to 10% of your bonus.

Do some good

 If you wish, you can even direct the bonus, or at least a part of it, towards charity. Do some research and choose a cause you believe in and an organization you trust. You can choose causes such as treatment of critical illnesses like cancer, or education of underprivileged sections of society, or even helping debt-ridden farmers. While only you can decide how much you should donate based on your priorities, it would be practical to invest around 10% of your bonus. Apart from the sense of satisfaction, charitable donations even make you eligible for tax deductions u/s 80(G).

Invest for the Future

If invested correctly, your bonus can make you a lot more money.

Since the bonus is flexible in nature, consider opting for single premium plans which only require you to pay premium once. These plans would let you pay once and watch your investment grow in a steady manner without any requirement to make additional premium payments. In case you choose to invest future bonuses, you can do so through the optional ‘top up’ feature. You can choose from popular plans in the market such as ICICI Prudential Life Easy Retirement SP. It will help you create a kitty by the time you retire and ensure a regular income post retirement.

You should look at investing at least 30% of your bonus to extract maximum benefit. The reason this is an extremely smart move for your future is that the plan leads to a maturity pay-out that you can receive as a lump sum or receive it as regular income for the rest of your life. Was there ever a sweeter choice?

So what’s the best option?

It depends on what you want from life! One of the best option to ensure a better future for you and your family, would be to find an investment avenue that grows your money. How much you invest is in your hands, but it’s essential to do so every time you get a bonus. As for the rest of it, you must decide which of the above options would suit your finances and also give you satisfaction!

Disclaimer

Unlike traditional products, Unit linked insurance products are subject to market risk, which affect the Net Asset Values & the customer shall be responsible for his/her decision. The names of the Company, Product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns. ICICI Pru Easy Retirement UIN: 105L33V01. L/II/0090/2016-17

About The Author

ICICI Prudential Life Insurance Company Limited is one of the leading life insurance companies in India. We provide insurance plans & policies that include a range of products like term insurance, ULIPs, tax saving plans and pension & retirement plans.

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