The 20 Smart Moves For Your Year-End Bonus

It’s that time of year again when many of us are thinking about our year-end bonus. Whether you’re planning on using it for a big purchase, investing it, or just saving it, here are a few smart moves to consider.

Hello, everyone It’s a bright, sunny day in the world of Corporate America. The economy is recovering, companies are sitting on lots of cash, and year-end bonuses are making a comeback.

Congratulations!

If you, my friend, are you the proud owner of a new chunk of change, congratulations! Your boss recognizes your commitment to hard work. I do too, and I give you a pat on the back, a gold star, and a high-five!

Since you want to be sure you use that one-time windfall the right way, EndofDiscussion compiled 20 smart money moves for your year-end bonus.

BUT! First things first, before you even about using your year-end bonus, here are some best practice pointers:

Best Practice Pointers Before You Spend Your Year-End Bonus

• Don’t spend it before you get it. You likely don’t know how much your year-end bonus will be, or how much will be taken out in taxes. If you rack up credit card debt expecting you can pay it off with a bonus, and you don’t get that bonus, you’ll be in for an unpleasant new year.
• Move your year-end bonus to a savings account ASAP. You don’t want to accidentally burn through your bonus just because it was sitting in your checking account, subject to the whims of the holiday spending season.
• Sit on your bonus while you decide your best course of action. There’s no need to make a move right this second (and you may be better off by letting your emotional dust settle).
• Use 80% to improve your financial life and future opportunities, and use 20% for play. In my mind, it’s REALLY important that you enjoy a portion of your bonus.

Here’s why:

When you take time to enjoy what’s been given to you, you create a good feedback loop:

Work hard–>Enjoy the fruits of my labor–>Feel good about working hard–>Want to work harder, etc.

When you fail to enjoy your bonus, you may end up instead in a downward spiral:

Work hard–>Hoard money–>Feel like work only helps you “get by”–>Resent your work–>Work less hard because you’re only “getting by” anyway–>Life sucks.

See why that’s important?

Good.

And now that we have that out of the way–

The 20 Smart Money Moves for your Year-End Bonus!

1. Pay off any high-interest credit card debts. You’re so ready to be done with them anyway!
2. Build up your emergency savings to 3-6 months of expenses.
3. Build up “future expense” savings, for things like a car, house down payment, babies, travel, quit-your-job-to-start-a-business funds, etc.
4. Ask your employer how to direct a portion of your bonus to your 501(k). (Note: Your standard contribution will likely be automatically taken out of your bonus, but you can elect to contribute more!)
5. Increase your 501(k) contribution for the next year and use your bonus to help improve cash flow in the short term.
6. Open or fund your IRA or Roth IRA.
7. Start educational savings plans for your children.
8. Pay off a chunk of your mortgage, student loans, and other “good debts” (depending on your tolerance for debt and your long-term goals).
9. Make home improvements that increase the value of your property.
10. Get vehicle repairs that extend the longevity of your ride.
11. Pay for industry conferences and industry organization fees that will help you network and get ahead in your career.
12. Invest in certifications or education that will help you transition to your “dream” job.
13. Give to your favorite charity (use the Charity Navigator to check on how wisely they use your donations)
14. Start a small non-retirement brokerage account to learn about investing.
15. Save for any taxes you’ll pay in April.
16. Sell some under-performing investments, and use your bonus to fund any capital gains tax hit you may incur.
17. Consider life or disability insurance, and use your bonus to fund the premiums.
18. Hire a financial planner, accountant, or estate planning attorney to protect yourself and your family.
19. Upgrade your household appliances or windows to be more energy efficient.
20. Invest in a collectable that will appreciate in value, like fine art, jewelry, watches, or something else.

So enjoy this, and remember that this advice isn’t limited to your year-end bonus. In the event you receive a large windfall of any variety, check back here and see how you can strengthen your financial position and increase your overall net worth.

Happy bonus season, and Happy Holidays!!