You've just received a bonus, congratulations! A bonus can be exciting and overwhelming at the same time. On one hand, it's nice to be rewarded for a job well done, but what should you do with it? Should you save it? Invest it? Spend it on that special item you've really been wanting? It can be hard to navigate what to do with a signing bonus, an annual bonus, or any other kind of bonus you get from your employer. In this post, you'll learn some of the best ideas for what to do with a bonus from a financial advisor.
Save a little for taxes
If you receive a bonus at work, taxes will likely be taken out before you even see the money. However, depending on how much is taken out, your tax bracket, and a few other determining factors, you may still owe Uncle Sam come April 15th. By saving some of your bonus right away, you can ensure that you're not caught off guard come tax season.
Treat yourself (without splurging too much)
You've worked hard, it's time to reward yourself! A bonus is a great opportunity to treat yourself for the hard work you've put in, but it's important not to go overboard. Take yourself or your family out to dinner, treat yourself to a concert, or buy that gadget you've had your eye on. Just be mindful of how much you're spending and make sure you're not spending it all if there are other places it would better impact your finances.
Pay down debt
If you're carrying any debt, whether it's from student loans, credit cards, or a personal loan, using your bonus to pay down that debt can be a great way to reduce stress and save money in the long run. You'll pay less interest and put more money towards the actual debt, which can save you a significant amount in the end.
Add to your emergency fund
An emergency fund is a crucial part of financial stability, yet so many Americans don't have one. If you're one of them, using your bonus to start or grow your emergency fund is a smart way to give it a boost. It's always a good idea to have several months of money saved up in case of job loss or another financial emergency. This will give you peace of mind knowing that if something unexpected comes up, you're prepared.
Max out retirement accounts
If you don't have any debts and your emergency fund is fully funded, one of the best things you could do with your bonus is to add it to a retirement account. This could be a 401k, IRA, or other retirement savings account. The sooner you start saving for retirement, the better off you'll be down the road.
A bonus can be a great opportunity to get ahead financially and a flat-fee financial advisor can help you take full advantage of it. Depending on your situation, you may want to save it, invest it, or pay down debt. Rally makes it easy to find the right advisor to guide you on the right path. We hope this article has given you some ideas for what to do with a big bonus.