There is a controversy between year-end bonus and quarterly bonus. Some people say, getting quarterly bonus help to save the money. This is because, the end of the year means a possible credit crunch due to the festive season. While some people admit that getting a large amount of money at a time helps to meet big financial goals like insurance payment, debt payment, medical payment, feeding retirement fund, and so on. However, one should resist the urge to splurge.
Have you received your year-end bonus? Are you thinking about what the best you should do with the bonus? There are many ways of using that money, like from paying the mortgage to cover the insurance plan.
You can use your year-end bonus in the following ways:
1. Pay off your debt first
I know this sounds too dull, but this is actually what you must do with the extra money you earn. Every moneywise person uses his/her extra money to release financial burdens. Try to pay off your debt with the highest interest rate. Remember, the sooner you pay off your highest interest debt, the less you have to pay in the long run. If you don’t know, which credit card has the highest interest debt, then ask your credit card companies about it.
Check out - Worried about paying off holiday debts in January? Don’t! Trust OVLG
2. Put the money into an emergency fund
You must keep an emergency fund to tackle unexpected expenses. This is the right time to contribute money to the emergency fund. This money will help you to cover financial needs, like job loss, home renovation project, car maintenance, if required.
3. Splurge in a smart way
Your bonus is the result of your 12 month’s hard work. You have the right to enjoy with the money but staying within a limit. Buying stuff can’t bring real happiness. If you really want to see happy faces in your family, then:
- Plan a short trip spending a portion of your bonus.
- Go to a date with your spouse that you always wanted to go.
- Visit your parents you haven't met long or send tickets to them so that they can visit you to meet their grandchildren.
4. Plan for your retirement days
You must invest money for making your retirement days more peaceful. If you think it’s too early to get serious about retirement days, then you’re wrong. You must think about your retirement savings much ahead of time because your expenses will increase with time. So, getting a fat bonus is a golden opportunity for contributing to your 401 (k) or IRA account.
Read more - 401k and IRA major amendments in 2016 - Rules for retirement accounts
5. Pay off student loan debt
I would suggest not to splurge the bonus since you had already enjoyed a fun filled festive time with your loved ones. Rather, pay the remaining balance of your student loans to reduce the debt burden. If you have more than one student loan debt, then try to pay off any loan entirely. Thus, you’ll be able to save money in the coming days.
6. Looking for a new home? Make down payment
If you have a plan to buy a home, then you must use the bonus on the home buying project. You can make down payment on a house. If the bonus amount is not that big, then put the money into a high-yield savings account to grow.
Final thoughts
There are a lot of people who love to make a plan before getting their bonuses and start swiping credit cards. If you are one of them, then be aware. Last year, one of my friend Preston, planned an expensive vacation based on his bonus. He started booking a flight, hotel, using his credit card. Finally, when he got his bonus, it was not up to his expectation, and he repented a lot. So, I suggest that you don’t plan anything based on your bonus until the money is in your bank account.
What’s your plan with your year-end bonus? Please share your thoughts with me.
