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Stop. Don’t spend away your entire bonus!

Many large expenditures get postponed to ‘after bonus’, but this year approach it a bit differently. Plan your ‘after bonus’ investing needs first and then approach the spending aspect. By doing this you are actually enhancing your own future spending ability.

There is one month between you and the bonus season to arrive. Waiting for the new financial year to begin in April takes on a different flavour if you too are looking forward to annual bonus announcements. 

Many large expenditures get postponed to ‘after bonus’, but this year approach it a bit differently. Plan your ‘after bonus’ investing needs first and then approach the spending aspect. By doing this you are actually enhancing your own future spending ability. 

Apportioning that bonus 

Don’t make all your money decisions about planning for the future, your present is important too. However, giving the future a little bit of thought can alleviate the experience without compromising on your present.

Let’s say you get a bonus of Rs 1 lakh, of which you have already planned expenditure worth Rs 20,000 on household goods – maybe furniture or electronics needed for the home. You have also been eyeing that really cool noise cancelling head phones worth Rs 10,000 and your bonus can surely cover that.

Plus, there is the summer camp your child wanted to go for, another Rs 20,000 for that. Some more for the annual wardrobe shopping and holiday – great your bonus amount has covered all the big expenses. 

For some of the other plans like the summer camp and the annual wardrobe expenditure, since these are known and somewhat required expenditures, you can actually save ahead by putting aside small amounts every month into stable return funds like liquid funds. 

But you haven’t really saved anything at all. Your monthly savings may be happening already through dedicated systematic investments in mutual funds and you may not feel the need to utilise any of your bonus towards it. However, adding small lump sums to your existing monthly investment flow can give the final outcome a good bump up. 

Think about it, if every year you put aside half your bonus amount towards investments, you will have that much more to spend 5-10 years on. What will you miss, maybe that pair of headphones? How critical are those anyway and if your Rs 50,000 investment works well, you may be able to afford that indulgence soon.

For some of the other plans like the summer camp and the annual wardrobe expenditure, since these are known and somewhat required expenditures, you can actually save ahead by putting aside small amounts every month into stable return funds like liquid funds. 

That way you are well prepared from your monthly earnings itself and don’t need to spend your lump sums inflows.

The colour of money is the same; its left up to you to decide how you will use it. Don’t be too cautious and put everything away from an unseen, unknown future. At the same time don’t be foolish and spend it all today. You have to find your balance between what you can afford today and what you should save up for tomorrow. The first step is investing first and spending later, the second step is in identifying the spends you can actually afford to indulge in and lastly, make both spending and investing an automatic part of your money life – one shouldn’t happen at the cost of the other. 

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