How to allocate your annual bonus effectively
Hrishan has just received his annual bonus. In the past, he has spent similar windfalls frivolously, yielding no tangible benefits. Determined to be more purposeful this time, Hrishan is thinking of using the money to prepay some of his existing loans or following his friend’s suggestion to invest. He has a solid savings and investment strategy that he typically adheres to, but he’s also tempted to accelerate his goal of purchasing an Apple laptop, a long-standing aspiration. He has his eye on a new car as well. Hrishan is torn between the various options for using his bonus.
Hrishan must assess whether he has factored in this extra income while drafting his budget and savings plan. If he has, he should adhere to the plan and not view the bonus as a supplement. However, if the bonus is indeed unexpected additional money, Hrishan needs to weigh his options and determine his course of action. While deliberating on the options, it would be prudent to transfer the money to a liquid fund to prevent impulsive spending.
Repaying a high-interest loan would enable Hrishan to save on interest expense and release his regular income from EMI obligation. It is advisable to prioritise the settlement of credit card and personal loan debts, which typically attract higher interest rates, before considering partial repayment of home loan. If Hrishan perceives his current job as precarious or prefers flexibility in career, keeping his loan burden minimal might be wise.
Allocating a portion of his bonus to catch up on any lag in his
