Great news! You received a bonus, and now you have extra funds to put towards your life bucket list. The question is, what’s the right strategy for optimizing those dollars, so your bonus keeps on giving for years to come?
Most people seem to earn their bonus sometime in the first quarter, commonly February or March. Early in the year is a great time to plan, clean up past debts, or better your financial positioning overall. So, here are different ideas to optimize your bonus and how they play out in real life.
Use Your Bonus To Fix A Poor Financial Situation
The best thing to do with your bonus is to make up for past indiscretions. This is a great time to eradicate less than desirable financial situations.
Whether it was poor judgment or an unavoidable expense, your bonus dollars allow you to fix a financial situation regardless of how you got there. Use it to pay off bad debts or free up cash flow that can help get you on solid ground today.
Put Your Bonus Towards The Next Near
Another way to look at your bonus is as a non-retirement investment account that creates additional savings. Consider your significant expenses for the year, meaning the ones you cannot cover through normal cash flow, and use the bonus for those costs. For example, summer camp for the kids, a family vacation, or house projects might be on the list. This cushion helps alleviate the stress of allocating these dollars for the year ahead.
Let The Bonus Improve Your Overall Finances
Using your bonus to improve your overall finances generally comes after the previous two suggestions. First, you want to rid yourself of a bad situation, and then you want to make sure you prepare for the immediate future. Once you have accomplished these financial matters, utilize your bonus to better your overall situation.
Some good ways to invest in your overall financial landscape are to put more into your retirement accounts, pay off your mortgage, or set aside extra money for your children’s college. While the choice is yours, connecting with a financial planner first helps determine how best to allocate these funds. Using your bonus to put away for next year’s significant expenses while contributing to an investment account is a great way to support you and your loved ones.
The Bonus To The Bonus
Innovative financing is an art form and a science. This is why working with a financial advisor to help formulate your thoughts is highly beneficial to help you achieve what you are trying to accomplish.
Ultimately, congratulations on earning recognition for your hard work and using this reward to make sound financial decisions. How to use your money is very personal and emotional, which is why working with someone who can see things clearly will make it easier to make the right decision.
This post first appeared on Forbes.