Your appraisals were probably done April. Some of you got good ones and some maybe not so good. It’s been more than a month now. You are probably back to your daily work routine and impressing the boss is probably not high on your agenda right now.
Whether you got an appraisal or not. Have you given your money same appraisal?
Why should you bother giving your money an appraisal?
Apart from the sheer joy of work, the other thing that drives us to the office every day is the salary we receive at the end of the month. And just as your work assessment will have elements of current performance & future potential, your money needs to be looked at with multiple lenses.
Your money is not just meant for your expenses today, but also for all the tomorrows that you will wake up to. The person who wakes will keep changing as an individual, getting older, wiser, smarter, and more responsible.
This change means that what you earn, and save, today needs to change with you.
Let’s take some smart moves for your annual bonus
Get ready for an emergency
Experts recommend maintaining an #emergency_fund to handle your fixed and variable expenses through a period of six to eight months. This emergency could be a loss of employment, a medical problem, an accident, damage to property, and so on. While many of these situations can be covered with insurance, it helps to have liquidity in an emergency. Basically, you must assume that there could be a situation in your life where your ability to generate a monthly income could be impacted. This is where your emergency fund would cover you.
When you get your bonus, have a look at your spending patterns over the last six to eight months. Evaluate the size of any existing emergency fund you may have and if it would have helped you get through those months. If not, you may want to top up the fund. The ideal instruments for creating an emergency fund would be recurring or fixed deposits, liquid mutual funds, and debt funds.
Pre-pay your loan
We’re at a time where it’s advisable to pre-pay on your loans. The interest rates seem to have bottomed out; loans are also being offered at low interest rates. The yield on fixed income instruments such as bank deposits has also reduced. Therefore, having surplus income now is a great reason to reduce your loan balance through principal pre-payments. This has the potential to significantly reduce your interest payments in the long run. You may divert some of your allocation towards bank deposits towards pre-paying on your loan.
Doing this would not only reduce your long-term interest payments, it will also help you in the short term at any point the interest rates start rising again. Having made a pre-payment, the rise in EMIs would not pinch you as much.
However, if you’re nearing the end of your loan tenure, you may want to avoid pre-paying in order to maximise your tax savings through your home loan principal and interest payments.
Keeping the volatile market conditions in view SIPs are the best investment options for the average investor who does want to take risks. Starting a SIP in equities can yield decent returns over a long period of time. The smartest means to use this lupsum amount is to acquire debt funds with the amount and then start a SIP for equity funds with the same mutual fund company. This will provide security as well as growth which most of us look for in our investments.
Check Your knowledge on stock market
ENHANCE INSURANCE COVER
The right amount of insurance cover that will cater to the needs of your family in times of need is a fluctuating figure depending on various external factors beyond your control. The cover amount must be periodically reviewed to make it meaningful in terms of security it accords. When you get a bonus, it is the ideal time to review the cover and buy fresh cover with the surplus money in case you feel that the existing cover is inadequate
Reassess financial goal
Investment should be aligned to your financial objectives. When you get surplus income with your annual bonus and appraisal process, reassess your financial goals once again, and provision at least a part of your bonus towards those goals. With this increased allocation, you may be able to achieve those goals in a quicker time-frame.
What about your enjoyment?
You can distribute your bonus fund smartly between all your financial needs, and you can still allocate something towards your wants such as a holiday, or buying a car or new cellphone. Proper distribution of funds on the basis of financial priority would ensure that the money is not wasted and you are not deprived of the securities needed to enjoy life.
For more information, contact Moneymindz, the best free financial advisory service.
Leave a missed call @ 022-62116588
(or) Visit www.moneymindz.com
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