Bonus Uses: The right use of bonus money will change your future, know here...
If you have received a bonus, the biggest question is whether to invest this money or pay off the loan. Then let us tell you that it is wise to first understand which of the two can be more beneficial for you. So let us try to understand it in detail.
First of all do this work
Now that you have received your salary on 1st June, then if you have received a bonus this time, first of all, it is important to understand what you should do with that money. If you have a loan, then will you repay it or take a loan? So for this, first of all, you have to understand, on which loan the highest interest is being charged, be it a credit card, personal loan, or home loan, by knowing this you will be able to decide wisely whether to repay the loan first or invest it.
Choose according to the interest rate.
If you have received a bonus, then first of all understand on which loan the highest interest is being charged. The interest rate on liabilities like personal loans and credit cards can range from 12% to 24%, which directly affects your pocket. In comparison, a home loan usually has an interest rate of 8.5–9%, so whichever loan has an interest rate of more than 10–12%, is repaid first.
Adopt a balanced strategy.
If you have received a bonus, do not spend it like this. You can spend about 50-60% of it on repaying expensive loans like personal loans or credit cards and invest the remaining about 40-50% in investment options like mutual funds, NPS, or PPF for the long term. This strategy will give you relief from debt and will also create assets for the future, which is balanced and beneficial.
Invest or repay the loan?
You need to see whether the return from the investment is more than the interest on the loan or not. Yes, if mutual funds (10-12%) earn more than home loans (8.5%), then investing may be better, but if the return of FD (5-7%) is less than the high interest of personal loan (14%) or credit card (24%), then it is wise to settle the loan first.
Check the status of the emergency fund and insurance.
Whether you invest or repay the loan, first ensure your financial security. After getting the bonus, first, understand whether you have an emergency fund equal to 6 months' expenses and adequate health and term life insurance. If not, then invest some part of the bonus in this necessary security insurance, etc. This will protect you from unexpected financial shocks in the future and will give you mental peace.
Make decisions according to your situation.
By the way, to improve your financial condition, consider these things if there is an expensive loan like a credit card or personal loan, then first settle it. If there is a loan with low interest and tax benefits like home loan, then focus on investment. Also, most importantly, if there is no emergency fund, then first create it. For your long term planning, it is wise to strike a balance by repaying some debt and investing some, so that you are financially secure.
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