7 ways to use your annual bonus to accelerate your financial planning journey
It is that time of the year when you can look forward to the much-awaited annual bonus. You may have already made plans on how to spend it. However, this year, rather than spending the bonus on buying the latest mobile, gadget, vacation, etc., use it differently. In this article, we will look at seven ways of using the annual bonus to accelerate your financial planning journey.
Before you get down to the business of using the annual bonus for financial planning, you may set aside 10-20% of it. You can use this amount to treat yourself and your family. It is your well-deserved bonus for which you worked hard the entire year. Hence, you may use a small portion of it to enjoy.
The first step towards deploying your annual bonus is to use it to repay any high-cost debt you may have. These include credit card outstanding, personal loans, etc. Credit card outstanding balance carried forward beyond the due date attracts an interest rate usually in the range of 3 to 3.5% per month (36 to 42% p.a.).
Similarly,personal loans are given out at an interest rate, usually in the 10 to 18% p.a. range. There may be some charges for prepayment or foreclosure of personal loans. Please check on these charges. If you have borrowed any money from your family members, relatives, friends, colleagues, etc., you can return it from your annual bonus amount.
There is no point in using the annual bonus money for investments when you have a personal loan and credit card outstanding at such high interest rates. Hence, you may use the annual bonus to repay these loans first and then use the remaining money for financial planning. It will help you in improving your overall financial position. Reducing your debt burden frees up cash flows, which can be
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