Diwali is near, it’s time you get a bonus from your company. It’s extra money than a normal salary.
In India, mostly employee gets Bonus on Diwali and in some area /city on Christmas.
Outside India, normally employees get Bonus on Christmas- Thanks Giving day.
A bonus is a bonus, timing doesn’t matter. Whenever during the year, you get extra money.
It’s your moral responsibility to use it wisely for your future than spending recklessly.
Here we are sharing 9 best ways to use, Extra money whenever you get during the year.
1.Repay costly short-term loans – yes repay your credit card loan. Pay your credit card loan. Here interest cost is almost 35% to 45% annually.
Don’t strike in the game of minimum payment played by all Credit Card companies across the world.
Minimum payment stops your credit card to block by Company but the Credit card company continues to charge interest on the remaining balance. Sometimes it’s so happening, you end up paying more than your original expenses.
You should pay the loan taken from the unorganized sector like Committee / Chit fund running in your area or money taken from money lenders.
Here also cost will vary from 27% to 68% annually charged by these local money lenders.
Pay off their loan or at least reduce the loan amount. It will light your interest outlay every month.
Don’t be a cash cow for these credit card companies or money lenders.
2. Repay costly short- term loans- After paying your short -term loans, if there is a surplus or you don’t have short term loan, you can use it to pay long term loans.
Long term loan – Home Loan, here interest rate varies from 7% to 10% depending source of loan and when taken, fixed or variable one.
It’s said whatever you repay in the first 2-3 years of your home loan period, it helps you to reduce your interest out lay by 3X to 4X. Suppose you repay just Rs 50,000- is surely going to save at least 1.5lacs to 2.0lacs to you in interest saving.
So obvious, why make Bankers be rich on your money. The normal saving bank interest rate is 3 or 3.5%. FD rates varying from 4.5% to 7.5%.
It’s better to use money in the bank to pay off the loan. Don’t let anyone be Rich on your cost.
3. Buy a single premium term plan- for some people, it’s difficult to pay insurance premium every year on time. It’s difficult due to a lack of money related to discipline.
Good news for such people. They can invest in a single premium term plan and provide insurance security cover to their kith and kin.
What could be the best gift than this to your loved one? I agree these plans charge a large premium up front, but a one-time payment will take care of all your insurance needs. A 30-year-old man will pay a one time premium of Rs 1.57 lacs for a cover of Rs1 crore for 30 years.
4. Buy health cover for the family- Your group insurance sometimes doesn’t cover all your family members. So, it’s the perfect time to cover your family member with a family floater health insurance plan. This will take care of the hospitalization expenses of the family.
5. Set up an emergency fund- Covid 19 has made it tougher to survive for many families who never created or care for the need for emergency funds.
It’s your wake-up time and starts creating an emergency fund. Open a new bank account, that you will not touch normally.
Provide a shield of security to your family from unknown events or eventualities. Act like a superhero for your family.
6. Start SIP in equity scheme- Investing in an equity scheme can be started with as low as Rs 500. You can use Mobile App for the same or invest through an online portal. Your equity investment will provide you a 10X return than normal FD in long term.
You can start a SIP of Rs 500/- for child education / Marriage/ Gift on a special occasion.
7. Invest in FD’s through parents – Returns from FD are less attractive and interest is fully taxable. Investment in FDs might be not suitable for you. You can opt to invest in your parents.
You just gift money to your parents and then invest in FD. Interest income up to Rs 50,000 exempted for Senior Citizen and fully Tax- free income.
By adopting this you can make inviable to a viable option. That magic of knowing Tax laws and being financially smart.
8. Put your money in the NPS- Investsome part of your extra money in NPS. Investment is done in NPS entitled you an extra deduction of Rs 50,000/- in your income Tax return. This deduction is over and above the Rs1.5lac investment limit under section 80C. It’s the best way to plan your retirement with tax-saving efficiency.
9. Make your Home energy-efficient or invest in self-learning- after paying the high-cost loan and investing. Now time to invest in-home or self-learning. To increase saving capacity or increase earning capacity.
These days, electricity is not free in every part of India. If it’s free then with some limitations.
The best way is to invest in Solar energy and save your electricity bill cost or buy energy-efficient appliances.
If that’s all done, then you can invest in your self- learning. Invest in courses of Udemy / Coursera / learn from coaches or mentors to increase your earning capability.
These are 9 best ways to invest/use your Bonus or Extra money. You can comment or share your way or query.
My Tax dost will be happy to reply & solve your query.