With Christmas and the end of the year coming up, many people start to think about whether or not they’ll receive a bonus and, if so, what they will spend the money on.
If you feel confident that you have some extra cash coming your way, or even if you’re unsure but want to dream, here are some suggestions of ways you might spend the money in a smart way.
Paying Down Debts
For starters, if you have accumulated a lot of debt in recent months or years, why not use the money you get as a bonus to pay some of it down? For instance, you might have student loans you want to pay off, a chunk of credit card debt, a car or personal loan to cover, or a home loan you want to reduce.
Using your bonus in this way can help you avoid paying out a significant amount of interest that you’d otherwise get charged.
On the other hand, perhaps you want to set up or add to a college fund for yourself or one of your children. We all know that attending university and living on campus or otherwise away, if needed, can be very expensive and add up quickly. If you have a fund that you contribute to over the coming years, though, when you or your child are ready to head off to college, it won’t be such a financial burden or stressor.
For many of us, our homes are our kingdoms, and we’re constantly thinking about improving them and making them more visually appealing and practically comfortable to live in. If you have a long list of jobs you want to do around your place, you may find that your year-end bonus gives you an excellent kickstart in this area. For instance, you might use the money to purchase a ceiling fan with lights for each bedroom or to purchase reverse-cycle air-conditioning.
You may want to get your home’s roof cleaned, new carpets or tiles, etc., or knock out a wall in a living room or kitchen area to open the space up more. Other options might include spending the bonus on upgrading the landscaping in the yard, getting the interior or exterior of the home painted, or upgrading numerous appliances.
Invest in Yourself
Education can help us get better jobs, change our career paths, feel more secure in our roles, and give us meaning and purpose in our lives. If you have a year-end bonus coming to you, why not invest the money in yourself by putting the cash into educational courses of some type? Alternatively, you might attend workshops, tradeshows, or conferences, buy books, or pay for mentoring. All these expenses can pay off both now and in the future.
Invest in Stocks or Your Retirement Account
Another way to plan for the future and make smart use of a bonus is to put the money into some stocks or your retirement account. This can help you turn your bonus into even more money. You might put the cash you get into building your current share portfolio, or if you’re new to this investing category, the funds can help you get started.
An easy and lower-risk way to begin when you don’t have much knowledge of share trading is to invest money in a diversified index fund. This is a fund that invests in a variety of stocks, such as the S&P 500, which contains hundreds of stocks covering most industries. A fund like this allows you to own a tiny piece of many companies and get the index’s return. Historically, this return has been an average of ten percent.
Putting money into your retirement account will give you some helpful tax breaks, and you could potentially cut your tax bill, too. Plus, many companies can put a bonus straight into your 401(k) for you, so you don’t get tempted to spend some of the money.
Put Aside Money to Pay Your Taxes
Another way to spend your year-end bonus is to put aside money to pay your taxes. If you’re employed by a company, they’re probably already withholding tax from your wage, but not all do, and some don’t withhold enough, leaving taxes to pay at the end of the year. If you’re self-employed, you may find that you often have a whole heap of tax to pay at the end of the financial year. As such, covering some of your likely tax debt with your bonus can help take stress off your shoulders in the coming months.
Other ideas for how you can spend your bonus are to:
- Set up an emergency savings account for unexpected costs
- Save for some mind-expanding trips away from home
- Buy some fitness equipment to help you get healthy and feel better
- Upgrade your wardrobe to boost your confidence and dress to impress
Any options above are wise ways to utilize your bonus and feel good about how you’ve spent the cash.