Bonus Survival Guide: How to Make the Most of Your Winter WindfallBy First IB on December 19, 2016
The year-end bonus is one of the finest gifts that delights employees as the year draws to a close. And this year is expected to be especially bountiful! According to a survey by staffing firm Accounting Principals, 75 percent of human resources and hiring managers report their companies intend to give year-end bonuses in 2016.
If you’re lucky enough to expect a year-end bonus check from your company this year, now is the time to plan how you will use it. While it can be easy to get caught up in the revelry of the season and mismanage or misspend your winter windfall, following this simple guide can help you make the most out of your year-end bonus.
Put a Dent in Your Debt
It’s not particularly exciting, but your year-end bonus check offers an excellent opportunity to reduce your debt — or eliminate it entirely. Don’t let outstanding loans, holiday credit card debt or upcoming bills weigh you down. Start off the new year with peace of mind, knowing you’ve taken positive steps toward reducing what you owe. As an added bonus, you’ll feel the savings in the new year through lower interest due on the principle. That’s truly a gift that keeps on giving.
Build Your Retirement Savings
If your employer offers a 401k with a matching contribution, make sure you’ve reached the full matching contribution. Your employer’s contribution is essentially free money, and it’s a missed opportunity if you fail to take advantage of it. If you’ve already saved enough to maximize your employer’s 401k match, or if your employer doesn’t offer a retirement plan, invest your bonus in your own retirement account. [Subtle hint: Check out First Internet Bank’s 12-60 month traditional IRA CDs. To learn more about our products or tools for retirement savings, contact a First IB Relationship Banker.]
Remember: Emergencies Happen
No one wants to think about financial emergencies or unforeseen health issues, but life is often measured by how well we navigate the unexpected. At a bare minimum, you should have at least six months’ worth of expenses in emergency savings. While your bonus might not get you to that mark, putting some of your bonus into savings can offer security if you do experience an emergency. Hopefully, you’ll never have to touch it, but if you do, you’ll be glad you planned ahead!
‘Tis the Season (of Giving Back)
The season of giving can also be the season of giving back, and your bonus can let you do just that. It’s a privilege to be in a position to help others, and giving to your favorite charitable organizations and supporting philanthropic missions can be exceptionally rewarding. There’s also a good chance your generosity will come back to you in the form of deductions, come tax season. Enriching the lives of others never felt so good.
You’ve paid your debts, saved for the future, and given back to those who need it most. Now it’s time to treat yourself (within reason)! Maybe there’s a professional development class you’ve been wanting to take or a backpack vacation across Europe that’s always been on your bucket list. Whatever you do, see or buy, you can now enjoy it with a clear conscience, because you’ve done all you can to not only financially survive the new year, but also take care of your future financial self.
Happy new year, from all of us at First IB!