Got an appraisal already? Use that extra income to secure your future
Are you waiting for your appraisal and bonus? Or have you already received the revised salary?
Before you spend your "extra money" in partying, why not use it in a better way?
Thinking how? Then here we tell you.
Speaking with Zeebiz, Ajit Narasimhan, Category Head, Savings and Investment, BankBazaar.com, said that there are five best ways to use the money:
1. Create An Emergency Fund: Make provisions for a contingency fund to meet any emergency like a job loss or an accident. As a thumb rule, have at least six months’ worth of your current income in an emergency fund. If you have already created an emergency fund, review its sufficiency and top it to match your most current income needs. If you don’t have an emergency fund, create one immediately.
2. Say Goodbye To Your Debts: Lenders allow you to pre-pay a lump sum towards your principal balance periodically. Use your bonus to make principal repayments on existing liabilities – personal loans, credit cards, home loans.
Such partial or full prepayment reduces your outstanding liability and reduces the interest expenditure, which translates into tonnes of savings for you. However, when prepaying your loans, pay off the high interest ones earlier followed by the ones with lower interest rates. For example, prioritise clearing credit card balances as these are the most expensive form of debt.
3. Review & Buy Insurance: An additional increment in your salary or a bonus also gives you the chance to boost your insurance coverage. Life and health insurance policies are essential to every financial portfolio.
If you do not have a personal life or health insurance policy, rectify this oversight immediately and buy a policy today. A comprehensive health insurance plan covering yourself and your family members against any medical emergency is an absolute necessity today as medical costs are on the rise. If you already have life and health cover, review if your coverage is sufficient to support your current health and lifestyle needs, and buy additional plans to supplement your coverage if required.
4. Invest In Mutual Funds: Mutual funds present some of the best investment options for any investment need or risk appetite. Systematic Investment Plans (SIPs) of mutual funds help small investors to invest affordable amounts every month and also help in rupee cost averaging yielding optimal returns.
Moreover, mutual funds also help in creating funds to meet your various life goals. So, augment your investment in Mutual Funds and invest at least a part of your increment in Mutual Funds.
5. Review Your Financial Portfolio: Revisit your financial goals and make sufficient provisions for them. For example, check whether you have created an investment for your child’s future, for your retirement, and for creating assets for your family.
So, instead of following the above rules only in this month, start managing your salary every month!