Many employees that are lucky enough to get a holiday bonus will agree that spending all the extra cash that you have earned on things like pleasure, leisure and other treats can be very tempting. However, a smart person would rather find ways to invest or save the money and put it to good use rather than spend it all on things that do not have much long term value. With today’s economy in the uncertain state that it is, the smartest decisions to make seem to be the safest ones when it comes to any extra money we come across. So to help you make the best decisions when it comes to your money, here are a few helpful suggestions on how to use this year’s holiday bonus paycheck.
Pay Off Debts First
Paying off debts might not be a pleasing way to spend your hard earned holiday cash, and is by no means an investment of any sorts. Think of it, however, as a financial reprieve that will lessen the burden that debts such as credit card balances and personal loans normally take away from your monthly paycheck. Clearing some of the money that you owe to your credit card company will also help you to improve your credit score. It is just a good opportunity to get out of debt and save up the remainder of the money for later use or investments that can earn you interest rather than cost you later on.
Reduce Monthly Expenses
Upon receiving your bonus check, why not set aside some money to ease your monthly expenditure on regular bills like electricity, water, subscription services and so on? If you know December is going to be a tough month for you financially, the reduction in bills will be nice to free up the spending cash. You could also pay up some of your monthly tax rates in advance or pay off tuition for your kids’ college expenses for one or several months. Cutting down on your monthly expenses will not only help you budget well for upcoming monthly income, but it could be a great way to start saving more of your future as well.
Set up or Add to a Retirement Fund
If you have not already started to save for your retirement, then your holiday bonus should give you a great head start. Find a good company that does not put a minimum threshold on the amount that you can deposit into your savings account, like for instance a traditional IRA. If your income is steady, you can then set up something like a Roth IRA and continue contributing a small amount of your monthly paycheck to accumulate savings and interest. If you already have a traditional or Roth IRA beef it up with a nice lump sum addition.
Take Your First Step Towards Home Ownership
Owning a home is a dream that everyone has, and what better way to make your first downpayment for a mortgage than with your holiday bonus paycheck? If you do some good research and find a deal on a decent home, this might be the best opportunity that will set you up towards owning your own home especially if you are a first time home buyer. With mortgage rates at historic lows, a down payment could be all you need to get yourself setup with a solid piece of home ownership.
Open a High Yield Savings Account
Everyone should have an emergency savings account. In fact, you should have a few for different emergencies. While savings can be a lifesaver for unexpected expenses or just extra capital to invest in a business opportunity, not many people save some or enough of their monthly income, and most people complain of tight budgets and many financial commitments as being a hindrance. Therefore getting a holiday extra paycheck can be a great way to start off a culture of savings or even a good way to spend some time deliberating on the best way to use your extra income.
Buy an Insurance Cover
It is always wise to think about long term financial needs whenever you have extra money. One of the wisest financial investments that you can make for the future is to purchase an insurance plan (if you don’t have one or enough to cover your life situation). Depending on what your lifestyle needs are and the amount of your bonus, you can look into insurance companies that offer reasonable premiums and get a health policy or a life insurance policy for you and your family. It is a great way to secure your future and take care of upcoming financial needs.
The above are some of the smartest things you can do with this year’s holiday bonus (if you’re lucky enough to get one). Remember to keep in mind that corporate bonuses are subject to tax by the IRS - normally up to 25 percent. So be sure you understand how and when your bonus was taxed so you can plan to pay the IRS if you need to.
A bonus is also a great surprise that can go towards any of these investment, savings or debt payoff ideas. But the truth is not many people will get a bonus this year. Try to apply these money saving and investing techniques with other extra money you get no matter where it’s from.