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(Precious) Words of Wisdom : "Rich people have small TVs and big libraries, and poor people have small libraries and big TVs." ~ Zig Ziglar

Ten Do's and Don'ts for your Annual Bonuses

Given that annual bonuses are normally splurged on treats, travels, shopping and gadgets, not many are likely to like this post. 

However, I would still be a spoilsport. Why?

Because, the long-term and enduring pleasure that comes from judicious use of money far outweighs the short-term euphoria of splurging. 

So here's my list of 10 "prudent" do's and don'ts for any lump sum money coming your way. 

1.  Earmark a part of the bonus to pay-off any high-interest personal loan or credit card debt that you are servicing.

2.  Use it to replenish your Emergency Fund in case you have utilized it in the previous year or if it is still below the target value.

3.  Invest a part amount for your kids' education and / or your retirement.

4.  Keep aside a portion for any large expense that you have been planning for e.g. re-painting the house, upgrading your car.

5.  Prepay a part of your home loan, if the EMI payments are pinching you every month.

6.  Buy a bit of gold (preferably ETF), only if your gold holding is less than 10-15% of your total portfolio.  

7.  Please don't make the mistake of buying any 'wrong' insurance policies, as most people often do.

8.  And, of course, you can donate a part amount for a good cause (and even get a tax break on it).

9.  Don't let the money rot in your Savings A/c for too long. Deploy it as quickly as possible. 

10. And last but not the least, do splurge and enjoy a part of your bonus. (After all, all work and no play makes the life dull and boring).    

This, of course, is not an exhaustive list. In fact, it is just a broad strategy of how you can intelligently manage your windfall gains. Make sure do something 'extra'ordinary with this 'extra' money, rather than just being 'extra'vagant with it.

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