Got your annual bonus? Here are smart ways to utilize it

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months of living expenses in aneasy-to-access account. This fund acts as a financial buffer against unexpected expenses, such as medical emergencies or job loss, and prevents dependency on credit during crises. "It is essential to address any gaps in your financial safety, stability, and aspirations.

If there is a gap in your safety or contingency fund, that should be prioritized," points out Tarun Birani, founder and chief executive officer of TBNG Capital Advisors. Investing your bonus can have a profound impact on your financial growth. Whether you choose to invest the entire sum immediately or opt for a staggered approach, the strategy can significantly influence your portfolio’s performance.

"Consider a staggered investment approach by placing your bonus in a liquid fund and then using a systematic transfer plan (STP) to gradually deploy funds into the market. This helps mitigate risks associated with market volatility," suggests Vijay Kuppa, chief executive, InCred Money. STP gives you rupee cost averaging, whichis a strategic investment method where a fixed amount is invested at regular intervals, irrespective of market conditions.

This strategy mitigates the impact of market volatility, enabling the purchase of more units when prices are low and fewer when prices are high. Your bonus can also serve as an opportunity for tax-saving investments. For instance, investing in the National Pension Scheme (NPS) allows you to claim an additional tax benefit of ₹50,000 under Section 80CCD(1B) of the Income Tax Act, beyond the ₹1.5 lakh deduction limit under Section 80C for a financial year.