Bonus by your company always feels like a gift from the dearest employer and might be thinking of buying long due wants for you or your family. But do you think that it is the right time to spend hard-earned money on wants? Shouldn’t it be put to use in the case of uncertainties or paying off long-due debts, or simply investing somewhere to get decent returns?
Here are mainly five ways you can use your bonus money wisely while making informed financial decisions according to your current financial situation and future financial goals.
Pay off debt
If you have high-interest debt, such as credit card debt, consider using your bonus to pay it off. It will help you save money in the long run by reducing the amount of interest you pay. There might be a high chance that due to current economic conditions globally, amid layoffs and hiking inflation rates, you have taken credit to fulfil the needs of your family. Now, finally, if there is a bonus to get back financial stability, don’t miss the chance.
Save for emergencies
Make sure you have an emergency fund that can cover at least three to six months' worth of expenses. If you don't have an emergency fund, consider using part of your bonus to start one. There is also a possibility that you had emergency funds but utilised them due to financial crucial situations. It becomes necessary to maintain lost emergency funds, which can be done by using bonuses.
Index funds are a low-cost way to invest in the stock market. It provides broad market exposure and has historically delivered solid returns over the long run. If you do not have a wide knowledge of the stock market’s volatility, you can prefer investing in index funds as it has top performing stocks in the market and keep changing according to the financial scenarios of companies as well.
Mutual funds are actively managed portfolios of stocks, bonds, and other investments. They can offer diversification and professional management but also come with higher fees than index funds. Investing a lump-sum amount of money that you have received as a bonus in mutual funds could be a better way to utilise the bonus.
Investing in individual stocks can be risky, but also potentially rewarding. If you're comfortable doing your own research and picking individual stocks, consider investing your bonus in companies with strong fundamentals and growth potential. However, investing in an individual stock is highly risky in nature. If you have full-fledged knowledge of stock market investing, and a risk-appetite
Remember to do your research and consult with a financial advisor before investing your bonus to ensure that you're making the best decision for your financial situation, and using your bonus wisely can help you achieve your financial goals and improve your overall financial health.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com