USE YOUR INSURANCE BONUS SMARTLY

insurance bonus

It is the time of the year when you will have a salary increment and annual bonus as well. You must have already planned where to utilize the bonus. Wait and read and ponder on below following financial planning steps as well. These steps will help you to prioritize where you can use the bonus most effectively. We all have gone through the pandemic and you must have noticed various news of layoffs at corporates. Keeping that in mind we want you to think and plan your finances.

Create an Emergency Fund:

The financial planning suggests having at least 6-12 months of expenses as an emergency fund. So utilize your salary increment and bonus this year to create the emergency fund. This is why experts recommend that everyone should maintain an emergency fund that can be easily accessed at short notice. If you wonder what is the ideal amount to be kept, the thumb rule is to save enough to cover 3-6 months of expenses which should also include loan EMIs, insurance premiums, and other mandatory expenses if any.

Check Insurance Cover:

Check your life insurance cover and health insurance cover. If you have bought them only from a tax point of view then it is time to review the same. It is very important to have appropriate life insurance coverage in case of any unfortunate incident. At the same time review and ideally, increase health insurance coverage for the family as well.

Review your Long-Term Goals:

You can also utilize salary increments and bonuses for your child’s education or for your retirement. This way you can achieve your goal earlier. Where to invest this surplus will depend on your risk appetite.

Conclusion:

So, when you get that bonus or the salary raise, do plan your finances as per your priorities. To sum it up in Warrant Buffet’s words,” Don’t save what is left after spending. First, save and then spend whatever is left after savings.”

Location: India

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