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Are you expecting a jackpot this year – and what are your plans for it? We haven’t talked about how to spend your bonus in a while, so let’s discuss…
Are you using it to hurl at something? Pay off large debts like student loans? Make up for bills that you may be a little late (for example, an unexpected car breakdown or a vacation that costs a little more than you expected), or take advantage of “extra” smart things with annual limits. Roth IRAs ($6000 per year), 529s (varies by state), i-Bonds ($10,000 per year)? Filling “buckets” like fun money or holiday funds? Investing in index funds?
Other related questions: Do you prefer a bonus in December or January? Do you prefer a salary increase or bonus?
{related: financial tips for new lawyers (or other women at their first high-paying job!)}
For most people, I guess the answer is a few, if not most, of these.
When I was at BigLawmany people would get a small amount of the bonus (e.g. less than 10%) to get caught up in something fun like a big purse purchase or a vacation, and for many people the rest of the money is either pay a student loanor to pay a fund for a future down payment.
My own “bonus” situation is a bit weird now – even when the site is having a great year like this, it never feels like extra money as it comes in irregular chunks throughout the year. (Lifestyle reptile for the win!)
However, my husband usually gets a bonus and we are always happy to receive it. (It works for a very small company, so it’s not guaranteed at all.) I use this often for a Roth IRA and also to renew ours. Holiday Fund. This year I decided to do his Roth IRA stuff earlier in the year (the stock market is on sale, uh!) and so I borrowed some money from him. our entertainment fundI didn’t like doing that.
I also decided that we should Always Roth invests in his IRA – after all, you can always withdraw your contributions (not your earnings) after holding the account for 5 years. So I decided to amortize it by allocating a certain amount each month. So we don’t need his bonus for this year’s Roth IRA and will instead use his bonus to replenish the Fun Fund.
{related: how to save for multiple financial goals}
(We already automatically accumulate monthly amounts for 529s, our health care waiver (sigh), insurance money, and more – currently I sometimes have a monthly amount for vacation fund/or Fun Fund depending on our needs.)
{related: how to automate your savings}
Readers, what about you – are you getting bonuses this year? Do you have an overall strategy for how you spend, save or deposit your bonus? What are your top tips for others on how to spend your bonus?
Stock photo via Pexels / Karolina Grabowska.
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