Just got a bonus or a raise? Read these tips before you start Googling airfares to Thailand…
Using a bonus or a raise to catch up in financial areas where you’ve fallen behind is a great way to jump start 2015. From paying off high interest debt to setting up a college savings plan, there are plenty of smart ways to put that chunk of change to good use.
Pay off High Interest Loans
It may feel impossible to escape the credit card damage you did in college or mounting loans. But you actually can make a dent in your debt by using your bonus for a large payment. This lowers your balance and minimizes some of those high interest charges moving forward. Get a snapshot of where you stand with the Debt Repayment Calculator from Credit Karma.
Rebalance Your Investment Portfolio
Those extra funds are a great reason to take a closer look at your assets and determine what’s working and what’s not. We can help you adjust to create the right balance between return and risk, ensuring you’re pursing both long and short-term financial goals.
Start a College Savings Plan
Even if your kids are in diapers, it’s never too early to start saving for their college education. By starting early and using the variety of college savings programs available today, you can get a good head start on a college savings account. There are a couple of different types of college savings savings plans and each has different features and potential tax benefits. A financial advisor can help you determine the plan that suits your situation. The College Savings Plan Network also offers great resources and tips for getting started.
Think About Retiring
Unless you received a really enormous bonus, we don’t mean retire now. But if you haven’t reached your company’s 401(k) contribution limits, use your bonus to max out those weekly or monthly contributions. If your employer matches… consider that bonus doubled.
Open an Investment Account
Planning for the future can be daunting, especially when you have large expenses to deal with now. But the earlier you start investing (even low monthly contributions), the longer your money has to grow. Rather than let it sit in your checking account, create an investment account with your bonus to kick-start a financial safety net.
Prep for an Emergency
Fun? No. Smart? Yes. Unexpected issues pop up and can throw your monthly budget off track. Get prepared by setting up a fund for irregular expenses and circumstances like job loss, repairs, or costly medical bills for people and pets. A good rule of thumb is to have three to six months of expenses saved up for those worst-case scenarios.
Save for a Rainy Day
It may be tempting to book a trip somewhere warm or buy a TV that covers every square inch of your wall space. While it’s best to take care of outstanding debt and invest wisely, you deserve to have a little fun for burning the midnight oil at the office all year. Be sure to put a small portion of your bonus aside to treat yourself or your family to something special when the time is right.