You’ve probably been fantasizing about your holiday bonus all year long – perhaps it’s booking that trip to the Bahamas or heading to the mall right when the check hits your bank account. Not to ruin the fun, but we have some other ideas for how you should spend lump sum money. Here’s 4 smart moves to make the most of your holiday or end-of-year bonus:
Use this extra money to pay down debt, whether it’s on credit cards, student loans, or your car. It may not feel like it in the moment, but this will have a big impact on your financial situation in the new year by putting a little extra money in your pocket instead of losing it to interest. Pay down the debt with the highest interest rate first to maximize your impact (also called the “avalanche method” – fitting for the season!).
Deposit right into savings
It may be tempting to treat yourself with this this extra cash. You deserve it, after all. The biggest gift you can give yourself, however, is putting all – or a large portion – of the money directly into savings. Put it into a long-term savings account towards a house or retirement, or split the bonus among separate savings accounts for your short-term needs. Look into high-yield savings accounts and CDs that work with your plans to grow your bonus even more.
You worked hard for that bonus, now make it work for you. Do your own research or speak with a financial advisor to start or continue your investments to match your goals. It may take some time, but you can watch your bonus grow in value before your eyes. Ask your employer if you can automatically deposit a portion of your bonus into a 401k and if they will match a percentage of your contribution – a smart way to get essentially an additional bonus!
Invest in yourself
This one’s a happy medium between treating yourself and setting yourself up for success. Use your holiday bonus to invest in yourself in the new year with zero guilt. Kick-start something you’ve been wanting to do that will ultimately elevate your financial situation in the long-run. This could be heading back to school or getting a certification that will land you a raise or allow you to land a higher paying job, or funding a new side-business venture.
For more tips on saving and investing, visit www.penncommunitybank.com.