Diwali bonus: How to smartly invest and utilise your festive bonus this season 

As we approach the upcoming festive season, many employees in the workforce eagerly await bonuses as a gesture of gratitude for their hard work throughout the year. It is a common practice for both the central government, state government, and various corporations to announce appealing bonuses during this time. The Diwali bonus, in particular, is highly anticipated by employees as it brings a bit of extra joy and financial support just before the festive season.

This additional income has the potential to contribute to long-term financial stability if managed wisely. While there may be a temptation to splurge on gifts, vacations, or tech gadgets, it is essential to set aside a portion of this bonus to strengthen your financial security. This allocation can support your investments or assist in planning for future financial commitments. 

"By thoughtfully investing your festive bonus, you can make significant progress towards achieving your financial objectives. The key is to align your investments with your goals, maintain a balanced approach, and stay disciplined in your investment strategy. With careful planning and smart decisions, your festive bonus can be a powerful tool for building a secure financial future," said Atul Shinghal, Founder & Chief Executive Officer, Scripbox.

Listed below are some strategies to help you make the most of your festive bonus:

1. Identify Your Financial Goals

Start by clearly defining your financial objectives. Are you saving for a home down payment, planning for your child's education, or building a retirement corpus? Having clear goals will guide you in choosing the right investment avenues.

2. Clear High-Interest Debt

Consider using a portion of your bonus to pay off high-interest debts such as credit card balances or personal loans. This approach can save you considerable money in interest payments and improve your credit score.

3. Strengthen Your Emergency Fund

An emergency fund is crucial for financial security. Aim to have at least six months' worth of living expenses saved. If your emergency fund isn't fully funded, allocate part of your bonus to this purpose. This will provide you with a safety net for unexpected expenses or income loss.

4. Utilise Tax-Saving Instruments

If you're opting for the old tax regime, explore tax-saving investment options under Section 80C of the Income Tax Act. These include Public Provident Fund (PPF) and Equity-Linked Savings Scheme (ELSS). Investing in these instruments not only helps you save on taxes but also offers potential for good returns over the long term.

5. Diversify Your Investments

Diversification is key to managing risk. Consider spreading your bonus across different asset classes through Multi Asset category mutual funds, which invest in stocks, fixed deposits, and gold. This approach can help balance your potential returns and risks, ensuring a more stable investment portfolio.

6. Invest in Your Personal Development

Using a portion of your bonus for personal development can yield long-term benefits. Consider investing in courses, certifications, or skills enhancement programs that can boost your career prospects and earning potential. This is an investment in yourself that can pay off significantly in the future.

7. Accelerate Your Retirement Plans

Unplanned inflows like festive bonuses can significantly speed up your financial goals, including retirement. By investing your bonus wisely, you can build a larger retirement corpus faster, potentially allowing you to retire earlier than planned. Consider increasing your contributions to mutual funds or retirement accounts like the Employees' Provident Fund (EPF) or National Pension System (NPS). By investing and staying invested in equity-oriented mutual funds, you can witness the wonders of compounding over time, helping you achieve financial independence sooner.

8. Seek Professional Advice

If you're unsure about where to invest, consulting a financial advisor can provide personalized guidance based on your financial situation and goals. A professional can help you create a tailored investment plan that aligns with your objectives and risk tolerance.

9. Review and Adjust Your Investments Regularly

Your financial situation and goals may change over time. Regularly review your investments and adjust them as needed to ensure they remain aligned with your financial objectives. This proactive approach can help you stay on track and make necessary adjustments in response to market conditions or life changes.