Splurging away your performance bonus? Think again

With the beginning of the new financial year, one also looks forward to appraisals and annual performance bonuses. While extra cash is welcome, handling it can be tricky because there may be a temptation to go on spending spree. Financial experts talk of several ways how your extra perks can maximize your returns.

Clear debt

Experts say the best thing you can do for yourself is to be debt-free. With the current lifestyle changes and easily available finance, one often gets under this debt burden of home loan, car loan, personal loan, credit card outstanding loans, etc. Check your dues and go for clearing the ones with no tax benefits and higher interest cost first.

Save tax

If you’ve maxed out Section 80C, mediclaim and HRA while giving your investment declarations, check out other options of saving taxes like NPS.

Up to Rs 50,000 invested in NPS under the new Section 80CCD (1b) is eligible for additional tax deduction, over and above the Rs 1.5 lakh investment limit under Section 80C. At the highest tax bracket of 30%, this could imply a savings of Rs 15,000 on your next tax bill.

Invest more

One should focus not only on saving money but also on growing one’s wealth. Dedicate a portion of your earnings towards investments. Build a portfolio with diversified assets. Invest in equities, mutual funds, debt funds, FDs, PPF and even gold.

Insure yourself

Buy yourself a health and life insurance policy if you do not have one. Healthcare expenses are skyrocketing and there is little certainty of life. To ensure our loved ones remain financially secure, we must insure ourselves.

Build an emergency fund

Covid-19 pandemic has taught us to be prepared for emergencies in life. Any situation can lead to unexpected job cuts, salary cuts or inflated healthcare expenses. That’s when an emergency fund can come to our rescue. If you already don’t have one, set aside the money in a liquid option. Drawdown as and when the liabilities or unexpected expenses arise. This will pre-empt the need to indulge in any fire sales or taking bridge loans to tide over liquidity mismatches.