According to CNBC, the average company bonus in 2017 was $1,797. Not all employees can expect a year-end bonus, but for those who received one, congratulations! There are numerous ways you can use the extra money you earned to benefit you and your financial situation. Here are some ideas for how to use your year-end bonus:
Build an emergency fund
If you don’t already have one, use your bonus money to start an emergency fund. An emergency fund ideally provides a six-month cushion of living expenses reserved for unexpected expenses or an emergency that may arise—and it can help you eliminate debt, because you’ll be prepared when something unexpected happens.
Deposit your bonus check into a Certificate of Deposit (CD)
Put your money to work in an account where it can grow. A CD is an FDIC-insured investment option where money is put into an account that is not used for a period of time. With a CD, you can earn more interest than regular savings accounts and grow money faster. This can make it worthwhile to let your money sit untouched. To open a CD, contact us or open one online.
Pay off good and bad debt
A large chunk of “bonus” money can be great for paying off good and bad debt. Bad debt is anything that has high interest rates or decreases in value immediately after you buy it, such as a credit card. On the other hand, good debt is anything that has low interest rates, such as student loans. Once you pay off student loans, consider funding a college savings account for your children or loved ones.
Donate to your desired charity
Use your bonus to donate to a cause or organization you’re passionate about. This is a great way to give back to your community and utilize your bonus and to help those in need, especially after the holiday season.
Invest in another retirement savings account, such as a Roth IRA or traditional IRA
Enrolling in a 401(k) is a great start, but you may also want to consider additional retirement plans. If you’ve already maxed out your 401(k) contributions, it may be a good idea to open an IRA. If you haven’t maxed out your contributions, consider increasing your contributions to your existing 401(k).
Treat yourself (within reason!) or save for a major vacation
After all of your hard work this year, make sure to enjoy your achievements and successes—but within reason! Consider saving for your dream vacation, become a member at a local gym you’ve been wanting to join, or have a spa day. With extra cash available, now could be the right time to splurge on an item you have been saving for, but be careful not to overspend just because you received a bonus.