Just received a Diwali bonanza? Good news. Rahul Jain, Head, Personal Wealth Advisory, Edelweiss guides you on how to make the best use of your additional cash flow.
Smart ways to use your Diwali bonus
Topping up your SIPs
One of the best way to safeguard yourself from stock market volatility is by shifting the focus towards mutual funds (MFs). Not only will investment in MFs protect you against volatility, but a periodic increase in the amount of the investments serves you well in the long-run. Unless you have outstanding payments or debts that you need to clear, putting your Diwali bonus into lucrative investment avenues is always the best decision and indicative of smart financial planning.
Settle impending dues
The festive season will serve as a good time to clear any impending debts you have in your kitty. Start by clearing off your credit card bills, personal loans and prepay any part of home loan. Prepaying a big-ticket loan can help you cut down on the tenure of the loan.
It will be only a month or so when most employees will have to provide proof of tax savings to their employer. And last-minute decisions for investments lead to a dip in savings that you have earmarked for other goals. If you are not able to do so then, tax cut from your salary in these months could disturb your monthly household expenses. A Diwali bonus can also be used for making tax saving investment, to ensure you receive a better post tax income in coming months and keep your finances in manageable limits.
Fill your investment loopholes
We generally tend to put our long-term investment goals on the back burner until there is a considerable rise in salary or existing liabilities have been met. These can include long-term goals such as retirement, kids' education, investing in an asset among others. When we receive a Diwali bonus, it is always recommended to create discipline and put some part of it to your long-term goals.
These lumpsum contributions can help to accelerate the achievement of the goals or meet any shortfalls. Remember, even though the initial savings amount may be small, over the longer term it can go a long way to bridge the loop-holes between the required amount and accumulated amount.