The one thing almost every employee looks forward to is the added dash of ‘bonus’ to make Diwali festivities just a tad more sweeter. It is all too easy to spend the Diwali bonus amid the festivities. But if there is one thing that 2020 has taught us, it is about being prepared for the worse.
Depending upon how you are currently placed, you can use your Diwali bonus to invest in various options to safeguard your short term, middle term or long-term interests.
So here are some tips for all Indians to invest Diwali bonus to reap rich dividends than just the instinctive splurge.
Relook life essentials and invest in insurance needs
While we may have adapted to the new normal, Covid 19 remains a threat and a big one at that. A good investment can be to opt for a good health insurance plan or to enhance your current ones with adequate coverage for all family members including your parents, to safeguard your family towards any unprecedented health scares.
Do check on the Covid protection cover or coverage for those who have recovered from Covid before you invest.
Get rid of short term loans
Sometimes just to wipe the debt slate clean and getting rid of short term loans can be a great investment towards a positive credit score line. The pandemic has been hard for each one of us financially. Loan defaults, economic hardships and relying more on short term loans has been a common story.
Diwali bonus can be your best friend to get rid of all such short term loans. This can ensure you retain a healthy credit score opening up your loan options for essential needs in the future.
Invest in an emergency fund
An emergency fund sounds good but is arguably the most overlooked investment option. This is till the time one encounters an emergency and faces a cash crunch. This diwali bring a sense of planning to your financial management and invest in an emergency corpus fund. Depending on your needs, risk parameters and the amount of capital you can opt for options like bank fixed deposits or liquid funds to ensure you are never short of liquid cash in an emergency.
Do however note that investments in liquid funds while offering decent returns ranging from 8 to 9% come with a taxation component for the interest earned. Thus choose your emergency fund investment options diligently.
Diwali bonus can be a perfect gold investment option
Gold is shining than ever in 2020. It will be a good idea to utilize your Diwali bonus funds for investments in gold and not necessarily physical gold. You may consider investing in Gold ETFs which allow you to start investing with as little as 1 gram of gold. For those not very financially prudent, an even better option is investing in Gold saving funds which are mutual funds investing in gold ETFS. If looking at a long term gold investment, a great option would be to wait for the next opening cycle for Sovereign Gold Bonds.
Don’t forget the tax liability
Many people overlook the fact that bonus you receive is fully taxable. So investment options must be evaluated keeping taxation in mind. For example is tax free returns is what you need, you may look at investing bonus in financial instruments like National Savings Certificate or Public Provident Fund (PPF).
Invest in “Yourself”
Invest in yourself – take a course in photography, wildlife, art, theatre or in upskilling yourself from a professional perspective. While we get busy with the routine life, our passion, hobbies or things we love, take a back seat. Use a portion of this bonus in indulging yourself.
Diwali bonus should not be restricted to just the festive season cheer and investment when made smartly can ring in financial cheer all year long and beyond. Rather than the amount, what matters is your planning and how you spend it – moderation is the key.
Plan wisely, invest intelligently and Happy Diwali!