How to make good use of your annual bonus

A list of financially prudent things (in the order of priority) that you can do with your annual bonus.

We work hard and wait eagerly for our annual performance appraisal -- all for a few rupees more! But most often this money gets spent in an impulsive way and we regret later and wish that you had used the money for a better cause.

Pay back your creditors

Many financial planners agree that it is wise to close out expensive loans like credit card debt, personal loans and overdrafts as soon as possible as we end up paying higher interest rate on the same. You may consider partial repayment of home loan or any other existing loans you may be currently running for which you are paying higher interest than what you would normally earn if you had invested the same at a competitive rate.

However, full repayment of home loan should not be considered if you have bought the house recently.

With the high interest during initial years coupled with prepayment penalty, you will end up repaying more than what you would actually pay had you continued with the loan; besides, you will also have to forego the tax benefits available on home loan repayments.

Your future goals: Rupee well spent!

The most popular reason why people end up spending money on those items that they actually do not want is because they don't have a clue on what to spend the surplus on!

Some of us buy ULIP policy on our well-wisher's (read: agent's) insistence, or decide to put the money into some mutual fund until we decide what to do with it.

Putting your money in the right savings instrument(s) is half the battle won. The best way is to avail the services of a qualified financial planner who would help you figure out your future goals and desires in financial terms and allocate your monthly savings, bonus and windfall money accordingly as per the investment period and your risk appetite.

The nominal fee you pay for good financial planning service helps you save significantly in taxes, transaction costs and offers comfort with peace of mind knowing that your future goals and commitments have been planned for, and you can now focus on life's better things.

Still have surplus money? Splurge!

What is such life where you cannot splurge on things you craved for? When you put your financial house in order and then splurge on stuff you've been longing to get your hands on, the feeling is GUILT-FREE!

So this time around when you receive that hard-earned bonus, take a moment to think where you want your money to really go.