A bonus at work isn’t a sure thing. After all, getting this financial windfall will depend on many factors, such as the profitability of the company and your overall performance.
If you’re expecting a bonus, then good for you. Just use it wisely. Spending this extra cash on unplanned road trips or a new electronic gadget can be tempting, but using your bonus on big-picture and long-term goals may result in greater happiness in the long run.
What should you do with the financial windfall you’ll be getting from your company? Here are a few best ways to spend your extra compensation:
- Hire a Professional Financial Planner
A company bonus could give you the funds you need to obtain valuable advice from a professional financial planner.
A certified financial planner (CFP) will help you come up with a financial plan tailored to your needs, wants, and goals in life. This professional can also provide tips on certain investments, such as stocks, bonds, and life insurance and investment policies.
If you need a professional to conduct a one-time review of your personal finances to make sure that you are on the right track, search for a financial planner who charges by the hour. Alternatively, consider a professional who charges a fee based on a percentage of your assets if you are looking for someone to guide you for years.
Before choosing a financial planner, meet a few ones to find out which professional is right for you. Also, check if they have a clean record by searching the website of the U.S. Securities and Exchange Commission, which provides details regarding business operations.
- Settle Outstanding Credit Card Balances and Other Debts
Loans and credit card debt can be a drain on your finances, especially when they come with a high-interest rate. The sooner you pay these off, the sooner you can start building your wealth.
Start by paying off some of your outstanding loans. Make sure you pay down on principal rather than interest.
Credit card debt typically carries the highest interest rate. Settle this one first, then bring down the number of cards you use. When decreasing the number of credit cards you have in your wallet, be selective about which ones you use.
Let’s say you want to keep only credit cards with loyalty programs. Although they can pay huge dividends from usage, you need to take care not to let your monthly spending spiral out of control to the point where the high interest trumps the benefits you’ll receive.
- Build an Emergency Fund
Life can sometimes throw a curveball at you – and push you to spend money. Unexpected expenses, such as sudden health emergencies, can put you in debt for many years.
If you don’t have an emergency fund, build one. Use the bonus you’ll get from the company to kickstart that crucial living expenses worth three to six months. Park this fund in your savings account or any accessible account.
- Increase Your Retirement Savings
Whether you contribute to a 401(k) or an IRA, maximizing your retirement savings is essential. These retirement vehicles will encourage or incentivize you to save by offering tax breaks. The earlier you tuck away some dollars, the more exponentially it will grow thanks to compound interest.
- Invest in Yourself
Another smart way to spend your extra compensation is to create moneymaking opportunities and build your wealth. If there is a professional group that you want to join or an online course that you’d like to take, now is the time.
If the lack of funds has held you back from capitalizing on these opportunities in the past, think about using a bonus to invest in something that could pay dividends in the long run. All this takes is learning a new and useful skill or meeting a new person to produce a compounding effect that may outweigh a few extra dollars to your savings or retirement fund.
Check with your community college or local university to find out if it provides any continuing education courses that will give you skills to help further your career. Also, look for conferences in your field you can attend or professional organizations you can join.
- Share the Wealth
If you want, consider a portion of your financial windfall to the charity of your choice. The act of helping others, especially those who are in need, will provide you with a better sense of well-being. What’s more, giving to charity provides you with a sense of purpose in life along with inner satisfaction and self-worth.
When you receive your bonus, don’t spend it all at once. Think carefully about how you’re going to spend that money – and don’t forget to thank your company for this wonderful financial windfall.
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