Fruits of patience & hard work are always sweet – this applies to your job too. Most of the employers in India have yearly appraisal systems and they declare bonuses & salary hikes, in the month of April. This is a rewarding moment & for some, this is the time when they think of leaving the job and start on their own. But if you have really worked hard, and other parameters are favorable, there is a good chance that this year, you may receive a good bonus amount – as bonus also depends on company’s performance. So keep your fingers crossed and keep checking with your HR guys. But, have you planned what you are going to do with this money – I think most of you have planned, but let’s check if your decision is right or wrong.
What about long vacation? – Summer holiday season is on us & kids would have already started pestering about getting bored. The friends and family will be serenading you with suggestions for exotic locations. It’s good to take a break with family once in a year – for after all, we are working to keep them happy. The kind of work pressures these days do not allow one to devote sufficient time to our loved ones & schools don’t allow long leaves to kids. So, summer holiday is an excellent time to bond. But your vacation should not depend on the size of the bonus for example, if I get “x” bonus ‘we will go to Manali & if I will get “y” bonus we will go to Dubai. This is a wrong way to use bonus – you should fix your budget before even looking at bonus figures.
What about Kids Computer & Wife’s microwave? – These can be important things that you might have been delaying for some time now. So you can think on these – check if it’s a need or a want. There can be endless list of wants but it is not practical to fulfill all of them. Once you have zeroed in 2-3 such things; attach priority tags with them. Go for the item which is high priority for you.
LED TV or a New Car? – The way gen-next manages their finances is totally different from last generation. New generation spends like there is no tomorrow. The relevance of tomorrow is realized when they get bogged down by heavy EMIs or when they get a 10 page credit card bill. Buying such expensive items is a big financial decision & should depend on your overall planning, rather than fat or slim bonus cheques. Things can get worse when you give just down payments & rest on EMI. So, now you have diverted your future income to present wants.
Someone rightly said “Too many people spend money they haven’t earned, to buy things they don’t need, to impress people they don’t like.” I think that was enough for our expense but there is a long unseen & in most of the case unplanned future lying ahead of us. All above points were expenses or liabilities which will not add much to our future needs but few of them can actually be important to have a good present.
Why not repay some loan? Why leave liabilities? Someone running a home loan or a car loan, bonus can be a good opportunity to reduce this liability to some extent.
Can some amount go for future? – Money is not good or bad but the usage makes the difference – I think this applies to most of these things in this world like nuclear power, weapons, EQUITY. Oh! How equities fit in this analogy?? Result from equity investment depends on how we understand it & use it for our benefit. Most of the investor think it is for short term or speculation but actually it should be understood as long term investment & growth asset. So try to add some part of your bonus in equities through diversified equity mutual funds for your long-term goals like retirement or child’s higher education. This will give substantial boost to your overall portfolio.
If you are not sure what to do, hire the services of a planner & get to work on your financial plan. If you were thinking on this line for sometime you can take this opportunity & have a planned future. One thing for sure – you don’t need to read some similar article next year after going through financial planning.
What Next? Sometime in our life this question comes – What next; I have already reached a level in my career what I dreamt 5 years back. How should I break this glass ceiling & reach that corner office. May be you need some more qualification to add in your CV or some soft skills in your personality – check what’s missing, what is related to my field, what boss CV says & fill the gaps.
What are your plans for Salary Increase? – Don’t tell me, you have already lined up a list of monthly expenses against it. Generally it is a trend that every year people increase their expenses more than their income increase. Take a New Year financial resolution to break this trend & prepare a budget. It’s not going to be easy to start with, but you will be able to fill the leakage points in your finance through budget. Check all expenses thoroughly. If you have still not plunged into mutual funds – start your Mutual Fund SIP (Systematic Investment Plan), as soon as possible.
What if you were not lucky this year? – It is bit disheartening that if someone does not get anything. Or Salary, incentives or bonus may be low, due to low profit growth, or other factors. This should not mean end of world for you – analyze what went wrong rather than updating your CV & shooting it to the whole world. It happened only with you or also with your peers, has company grown this year, is it a cyclical trend in your industry or most important is that me who is lacking something.
You are the biggest asset in your family & your career is the best investment that you would have ever made. So always take well thought out decisions. Churning is not the best investment strategy; similarly hopping jobs frequently will have negative consequences. You should only hop jobs in case you have a strong case that you are in a wrong bus. The best judge of the situation is you.