Everyone usually gets a bonus at year end or whenever a company closes its financial year. Depending upon your performance throughout the year, you are paid a percentage of your salary as bonus.

Here are few suggestions what you can do with your year-end bonus:

Treat Yourself. Budget a portion of your bonus and reward yourself with some short-term gratification.

Pay Off Credit Card Loans. Using your bonus to pay off a credit card may be one of the most productive moves you can make with it.

Reduce your Home Loan. Look at this as the best of both worlds — you get to spend the money by putting it toward your home’s equity, but still get some ongoing benefit from that money in the form of interest savings.

Make Tax Saving Investments. If you haven’t reached the contribution limits then put your bonus into action for tax savings.

We could go on with quite a few suggestions but everyone’ situation is different.

Whatever you do, please make sure that you just do not leave it lying around in your savings account. Yes, it might provide you with an ego boost and give you a very good feeling but it’s not the best solution for your money. A typical bank pays between 4-6% annual interest. The amount you earn is also taxable so it provides you with a very low return on your money.

E.g. If you get a bonus of Rs 5 lakhs and leave it lying in your account for a year, at the end of next year, it will be worth Rs 5.14 lakhs after taxes. If inflation is 7%, your money is now worth less than what it was worth last year.

So yes, don’t waste your bonus but make best use of it – either spend it to reduce your liabilities or invest.

Ultimately, it’s not just about your bonus but also investing your monthly savings in a planned manner. If you do it right, then you can give yourself a nice little bonus yourself apart from the one you get from your company.

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