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 hike in month of April. This is a rewarding moment & for few this is the time when they think of changing the job or 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 will receive a good bonus amount – as bonus also depends on company’s performance; and this year was better for corporate India. So keep your fingers crossed – keep checking your HR guys & salary account. 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.
Read: Personal Finance Tips from a recent trip
What about Kids Computer & Wife’s microwave? – These can be important things that you may be delaying from some time now. So you can think on these – check is it 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 on maximum priority.
LED TV or a New Car? – The way gen-next people manage their finances is totally different from last generation. New generation spend like there is no day called TOMORROW. The relevance of tomorrow is realized when they get heavy EMI to pay 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. In-fact won’t it be wise that if you are running any liabilities, the priority should be reduce it than going for some vacation or something else. (By Jitendra Solanki)
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 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 to our benefits. Most of the investor thinks 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 doesn’t matter you have planned your goals or not.
But hiring a planner & working on your financial plan was a better idea. If you were thinking on this line from 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 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 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 financial resolution to break this trend & prepare a budget. It’s not going to be easy in start but you will be able to fill the leakage points in your finance through budget. Check were there some expenses last year that you would have not done, is there any monthly expense which can be reduced. 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 not gets anything. You slogged for a complete year in appraisal interview boss says that salary hikes are bit low due to low profit growth, incentives & bonus are suspended this year and next year we may consider it. 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 which 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 decisions. As churning is not the best investment strategy similarly hoping jobs frequently will be negative. You should only hop job in case you have a strong case that you are in a wrong bus. The best judge of the situation is you.
Would you like to share or confess what you did with your last year bonus ??
very nice and hitting the nail.
In fact i know one of my friend who got just married and is working with one of the AMC. He too planned in the same way and has gone to Singapore for honeymoon.Had he been deprived of the bonus he would have thought of some Indian location.
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.Infact won’t it be wise that if you are running any liabilities, the priority should be reduce it than going for some vacation or something else.
I think this is the best usage of bonus – added it in the article. 🙂
Nice article,I am about get bonus in month end.Will plan wisely:)
Wanted your suggestion for below,
I have a ULIP plan started in JAN-2008 with AP of 15k.I have already completed mandatory payment period for same.It covers 3Lac as insurance.
Should I continue to invest in ULIP?If not what are the consequences?
My suggestion will be to surrender it
Leave about how much worth of insurance it is. The most important point here is you have already invested your considerable amount of time and money for 4 years. Your total investment is 60k till now. But what about the allocation charges etc. As you have said that the mandatory period is over I assume there is no further payments needed and so just HOLD it. How about the allocation for equity? and debt for the ULIP? If the equity share is more then this is not the right time to exit from the ULIPs. Just wait for the next Bull phase which is only after the Sensex 22k and sell it anywhere between 25k and 30k points. Acc to me, surrendering policies just because they are not good is not a wise thing to do. 4 years of time is not a short time. Make calculations, check if you are in urgency of money or not, and then exit.
I would suggest one thing, if one gets a salary hike, he should invest that hike completely and try to manage within the limits of old salary. After a couple of months, if he can’t manage within the limits of old salary, he can start utilizing his hike. This way, a minimum of 17% of the annual hike is saved for future. It worked for me.
i m just 22 and i have just started earning…I feel thats a good idea…
It worked with me also. I too followed the same strategy. I used to increase my SIP amount and fully utilized my salary hike.
Investing a bonus for a goal already planned seems really gud…just sum added cushion. I feel it can also be used to upgrade term cover/ health cover if need…
I have an ULIP- HDFC SL Youngstar- annual premium of 50,000/-, started in 2005 giving a life cover of 5 lacs. I have so far invested 3.5 lacs as premium & the current value is 4.5 lacs. Shd i continue ?? I already have a term cover & do invest in Diversified MF’s. Kindly advise….
I have a simple question inturn to the people who question about ULIPs on when or whether to exit?
Assume that you have an infamous LIC policy. You will have an option to surrender it after 3 years and it returns you some part of the premium paid in return. So, do you EXIT from the insurance policy or continue till the end of 20 years to reap the maximum benefits, bonus, special bonus etc? If you say, you wait for 20 years then the answer to your question can be easily wait for long term ONLY for ULIPs too. If a FD gives 10% PA and as you invested in something which is directly related to equity which is more risky, you should at least expect a return of 3-3.5 times of safer ones like FD i.e 30-35% minimum is good. You don’t get anything if you keep on shifting money. Investmets are like seed. Give it some time. It will turn into a tree. It may see more/less rains but eventually it gives the investment resistance to grow and things will get bettter in the long term. This is not a faith. This is a calculation. India is a growing economy. Peace of mind is something which you can’t buy. So, if you are losing it then better sell it. Else, HOLD it.
I have already written on the same page, anyone who has been holding their ULIPs wait for the next Bull phase which is going to happen only after the 22K of SENSEX. Sell it at some 27K or 28K points. ULIPs should be redeemed when the markets are high but waiting till the end of the term period is dangerous and foolish as you will lose everything if the makets are down by the time your ULIP ends. At least book 50-70% profits as per your appetite atleast in a good bull phase.
I am a great fan of your blogs in particular and your philosophy of life in general. Yes, I too have received a decent amount as bonus this year. I have already invested some of that into direct equity and the remaining will go in to purchase some home appliances which I need. Since I am not an impulsive buyer at all, it saves me a lot of pain related to overspending 🙂
I think you have misunderstood what Hemant is trying to say. He is emphasizing here on being prudent. A lot of people in india do not know how to calculate tax, leave alone financial planning. So, gain the knowledge and help yourself.
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.”
That someone is Will Smith- Hollywood Actor.
Only question – How would someone be paying for catheter after 30 years?
You very well know about Healthcare services and cost in INDIA.
Srivatsan has an answer for everything :p. Methinks, even if the god appears before him and asks him for only one wish – he may retart asking “Who are you?” and the god answers “I’m the god” and disappears as the god has given a chance for only one wish. So, both the present and future lost. An opportunity is something that one cannot miss. I don’t miss an opportunity to buy my sweet heart a gift with that bonus or hike. If I think, why can’t I invest the same amount on her name in a Mutual fund or share, what I miss is an ‘important moment’. Life is about ‘celebrating’ the life itself. If the celebration is everyday then it becomes monotonous to us and to others too. If the celebration is once a while the essence of the joy indeed (un)knowingly increases. So, it is obviuos Hemanth is right and Srivatsan is right too.
A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life. – Suze Orman
My bonus and hike comes in Nov so I am not in a joyous mood right now. 🙁
But in the past I have tried to create a balance between spending and investing. Once I did the down payment of the home I purchased, another time for the car. If I don’t find anything worthwhile to invest I temporarily park the funds in FDs but I try not to spend on holidays and shopping.
Yes Vivek, I also used to get my bonus during Durga Puja/Diwali time. If you get it during festive time it becomes very difficult to curb the urge to spend. You are doing fine in this respect.
Dude, He is saying the same thing but with some maturity in his view….see he saying to plan ur vacation wisely i.e. taking account of ur responsibilities and need of ur families too..
Fantastic article yet again. Its upto an individual how well he feels financially secured to go ahead with the vacation from his bonus or incentives. The only thing I differ from your view is that I will not invest my bonus in equity diversified funds because I am already investing in it on monthly basis and dont want to disturb it with something additional. What I will do is put that bonus in my emergency fund. It makes me feel more comfortable if I have more money in my emergency fund.
Yes, Manoj contingency fund is very important. Those who don’t maintain adequate funds for emergencies are always disturbing their long term investments.
hi Hemant ji,
there will always be someone who does not agree, but please do not take it as something that will stop you from doing the great job you are doing, all the best to you for the hard work and sincerity that I had seen in you, it like giving everything you have for people who really care for others well being.
I know you are trying to refer to Srivatsan’s comments. But sometimes it is good to have some good sense of humor kind of comments. It lightens up the discussion and makes it more interesting. Hemant is always a champ in this field and will continue to post good articles. 🙂
I just said “Keep It Up” in your own way 🙂
I was recently reading some investing rules. I would like to share one rule here.
One of the best rules, especially for younger people is this : Every time you pay off a debt, get a pay raise, get a bonus or have any excess cash, have fun with half the money, and put the other half for your long term goals. By doing this consistently, in ten years you will be amazed at how much you have accumulated. Saving is a habit. Make a habit of investing half of any windfall big or small.
You are doing fine.
So afterall you do “put a portion in diversified equity funds..and sit back and pray” ..? 😉
Ha Ha. I work for Asia’s most respected company of India. My management didn’t announce any bonus or hike for this year and simply said they will consider the next quarter, the same MNC which earned thousands of crores of profits :p. So, I came here to write the same after I got the feed mail from Mr. Hemanth and just to leave this comment :). I didn’t even read the full article :(. There is no need for me to read too….
Hi Hemant/ Anil,
I know its difficult for both of you to answer this but still just an inquiry kinda question 🙂 The market seems to be languishing around the 17000 mark for a while now. When can we expect things to turn around or this correction phase will continue for some more time?
Answer is very simple – No Idea 😉
Ab ye mat kahna – Get an Idea Sir Ji.
It happens. Don’t worry. Time is everything. Time and tide waits for none :p. BTW, please let me know your positions, if you don’t mind. I’m quite curious to know :p :p. From 18K we have seen 17K, so this is the right time for the mid/long term but difficult for the short term. Anyone who enters into the stock market within the 22K can wait for the next bull phase to enjoy the benefits. All the best!!
Be greedy when others are afraid and be afraid when others are greedy – W Buffet.
You have addressed this question to wrong persons. Had you asked a politician, he would have said : I am not an astrologer.
“Jab jago tabhi savera ” why this because no one can time the market…
It’s better not to time the market but start investing as early you can in the long term it will pay you more..
SENSEX touched 15K of intraday levels twice in the month of May more precisely both times in the past week only. Greece exit can happen any time between 1 week – 2 months period. Once the Greece exits the Euro zone, what we can expect is either a Blood bath or a flower bath. Of the two, flower bath is ure going to happen according to my analysis. But, I don’t have the ability to comment if there will be blood or not :). I can just say, it’s time people should get ready with their liquid money to make use of any correction. If the SENSEX falls and shows the levels within 15K then start investing and then wait for the corrections if it shows weakness keep buying by averaging the share prices until it shows corrections. This is the time to BUY or HOLD but not to SELL. Look out for the large cap gems available at cheaper valuations. Whether it reaches 15K or even 14K, all I can say is that this is a life time opportunity.
Just to add, it may even take two years to reap maximum benefits. Be an Opportunistic in these periods not Optimistic with exact gestations.
Totally agree with you.
Enjoy the things with family & spouse at the time you can.
20 years later your body & liabilities both will not let you do that.
Enjoying doesn’t mean blowing money on full throttle – spending quality time with family is more important.
Every person has there own views regarding the life by reading the comments of shrivastan I didnt find any new except the enligten humour keep it up man the cheerfullness is also nessary while planning the future and vivek.k u r very funny 🙂 and hemant sir gud work waiting for ur new articles and dont lose hope I bet this blog is going to be one of the most popular blogs in the coming yrs bcoz of the unique style of presenting ur views oops sorry ur commentary 🙂
I always used to read the articles on Finance. I am fond of investment. last year as I received my Bonus , I added some amount from my savings account into that and cleared my home loan.
Hi Hemant ji,
I am investing monthly into SIP in MFs as 5000 (non ELSS), LIc s as 1500, tustion fees as 1700, infra bond as 20000 (per year). My home expenses are @ 8000, rent society and mseb bills as 5000, postal Rd as 500, Please suggest me how to go for best saving plan and take an advantage of income tax planning for this year (2012 – 13) as my in hand income including bonus and perks is @ 43000 per month. I have one home – flat – of @ 15 lacs (home loan is cleared) , have car loan of 4 lacs with 12.5 % interest (from two different banks) and emi is 9830. I have one daughter in tenth and son in sixth, and housewife.
For tax savings it’s the usual routine Pravin: –
– PPF and ELSS MFs for 80C
– Medical insurance for 80D (This now includes preventive health-up up to Rs 5000 as well)
– If your taxable income is below 10 lacs then you can get tax exemption for Direct Equity Investments under Rajiv Gandhi Equity Saving Scheme
– Tax Benefit on Infrastructure bonds has been removed so please check before investing for this year.
Bear in mind! No directives have been out for the RGES till date. It is the SEBI who is responsible for anything that is related to Equity. And we are yet waiting for the guidelines on this. Finance Minister in his Union Budget didn’t say anything on how it is going to be planned. The term “New Investors” used by the FM itself is puzzling for me :). I suspect this may not happen easily. If it really, I don’t mind to use this opportunity to the full ;).
Good point Sreekanth, announcement of a scheme is one thing and implementation is another. We are not so good in implementing things we announce to please people :).
Let’s wait and watch!
Namaste Hemant ji/ Anil ji,
I am a housewife with no income. I had a FD in Axis bank for Rs.1,10,000 @9%. period of deposit was 12 months 25 days. My husband gave me the money. He is in a PSU(SAIL).It matured on 2nd may 2012 and i wanted to renewed it for another year. I was about to get Rs.1,20,980 on maturity but they deducted TDS and renewed Rs.1,19,743. Now they are telling me about form 15G. I was really a dumb including my husband that we didn’t know this. They are telling me to file IT return this year in june-july and saying that the money will be refunded to me. I already submitted a form 15G after this.
Is there any way to get back my deducted amount?
I also have a savings account(either or) in this branch with my husband where I am the first applicant. If I file a IT return do I have to submit my savings a/c statement with it?
So, vis-a-vis, the difference is above Rs. 1000 due to TDS. Things one should know while investing on FDs:
1. If the Interest exceeds Rs. 10000 then the TDS @ 10% for PAN card holders and 20.3% of the interest for non-PAN card holders will be charged. 3% Education cess is also common(This is exactly what happened in your case too).
2. When you know that your interest is going to be more than Rs. 10000 then you have to submit the form 15G in your bank while opening your FD. This is giving an assurance to your bank that you don’t fall in the income tax even with this Interest. This is valid for that particular financial year and you need to keep on submitting till the maturity!
3. As TDS is already deducted in your case, collect the TDS certificate from your bank. You must need this while filing the tax returns. You can also check how much TDS has been collected from your online banking URL.
Easiest Solution: The same old Golden words – Never put all your money in one basket – Distribute your money across the banks. This way you don’t need to submit form 15G.
There are other things also, but it is difficult for me to write everything on comment section. So, I’m ending it here.
namaste sreekanth ji,
Thank you for your valuable comments.
“Easiest Solution: The same old Golden words – Never put all your money in one basket – Distribute your money across the banks. This way you don’t need to submit form 15G.”….this is what we are exactly planning to do. Sir if you don’t mind will you please tell me the other things you have mentioned above?
So sorry for replying late. Busy watching the markets. The points which I have written will be practically enough to be watch out for. However, few more things like:
1. If you want to invest in your son/daughter who are minors (usual trend in India), still take care of the TDS, as for minors a guardian is mandatory , and this guardian can be charged with the TDS.
2. Spread across “Banks” not “Branches of same bank”. TDS depends on how efficient the banks manage the accounts as you will produce the PAN card during the deposit opening. So, it appears wise to spread across the banks only. (Bank mgr may convince you but never mind RBI has been aggressive in strengthening banks and it may even set a guideline to make sure the TDS are collected).
3. You have mentioned you have submitted, 15G but there is no guarantee that every customer who subitted 15G won’t get TDS. As I already mentioned, it depends on how efficiently the bank manages.
4. The TDS is calculated on the excess of Rs. 10K interest and is for that FY only. So, if you have deposited Rs. 1 Lac @ 10% in Oct 2012 then the TDS will not be charged in the Apr 2013 but will be charged in the year ending of Apr 2014. In this case the interest will be distributed among the years.
If there are any confusions, just speak to the bank personeel once while opening a FD and they would be able to explain you easily with descriptive examples. It is diff for me to write here :).
Have Good Times ahead!!
Please change my avatar. I don’t know why I’m getting that sad smiley everytime, It hurts :p and more than that I hate PINK. It is a feminine colour.
can you please advise on how to invest (a one time investment) of rs one lakh. I want to go for equity mutual fund.
thanks and regards
🙂 thanks hemant. I read your article before asking for your advice. i am thinking of fidelity and ICICI blue chip. And may be ICICI student plan.
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