Don't blow away your annual bonus on needless things and unnecessary expenses. Use it to fortify your finances and fill the gaps in your financial plan

INVEST IN NPS, SUKANYA SAMRIDDHI YOJANA

The National Pension System is in the news lately due to the additional tax deduction of `50,000. Open an account today to gain from this new tax-saving option. NPS offers subscribers the option to invest up to 50% in equity funds, which can, compared to PPF, enhance returns over the long-term. If you have a daughter aged less than 11 years, invest in the Sukanya Samriddhi Yojana. It offers 9.2% interest, making it better than the PPF. But the lock-in period is longer.

REPAY HIGH-COST DEBT

Repayment of costly debts should be priority. Credit cards are the most expensive, charging interest rates of 30-36%. Personal loans, which carry interest of 18-24%, are in the same category. High interest loans which give no tax benefits should be retired first. This includes your car loan. Next, you can look at prepaying education and home loans. Remember, foreclosing some loans, such as a car loan or a personal loan, could attract penal charges.

REVIEW LIFE AND HEALTH INSURANCE NEEDS

Most people depend solely on their employers for medical cover. Review your protection portfolio and enhance it if necessary. The life insurance cover should be at least 6-7 times your annual income. If you have home and car loans, take additional insurance for that. Medical inflation is rising at 12-18% per annum. The health cover should be at least `5 lakh and be enhanced every year. For a bigger cover, use a top-up policy. Do include your parents in the cover.

BUILD A CONTINGENCY FUND

Insurance and contingency funds make up the foundation of a financial planning strategy. The purpose is to take care of emergencies. People lock up large amounts in long-term instruments like the PPF but give little consideration to setting up a contingency fund. Experts say one must set aside an amount sufficient to cover at least six months' expenses in a savings account or liquid mutual funds.

INVEST IN 80C INSTRUMENTS

Are you among those who crunch their tax planning into the dying days of the financial year? Such people face a cash crunch because a large sum goes into the tax saving investments. Start your tax planning now. Find out how much more you need to invest under Section 80C. If there is a shortfall, put your bonus to work. This is important if you are investing in ELSS funds. Since they are equity schemes, staggering out your purchases over 10-12 months will help you average out the costs.

BUY PRODUCTIVITY TOOLS

Tempted to buy the latest smartphone when you see the fat balance in your bank account? It would be wise to resist the temptation and evaluate your needs first. Buy gadgets that can make your life easier or improve the quality of your work. Focus not on show-off value, but utility. For instance, you could upgrade to a car from a two wheeler to reduce your commuting woes. Similarly, you can look at buying a tablet or a compact laptop if your work entails sending frequent emails or reports while travelling.

INVEST IN YOURSELF

It is always a good idea to invest in enhancing your knowledge and skills. Many institutes offer online courses now and you could enrol for one to improve your skill set. You can also consider part-time courses that can improve your job prospects. Opt for a course that can enhance your skill-set and employability, thereby increasing your ability to earn