What’s Your Bonus Strategy?

Source: Corporette.com
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professional young woman with curly hair and glasses looks thrilled to be fanning herself with a stack of cash

professional young woman with curly hair and glasses looks thrilled to be fanning herself with a stack of cash

Are you expecting a bonus this year — and what are your plans for it? We haven’t talked about how to spend your bonus for a while, so let’s discuss…

Do you use it to splurge on something? Pay down major debt like student loans? Catch up on bills you might have gotten a bit behind on (e.g., the unexpected car trouble or the vacation that was a bit more expensive than you’d expected), or take advantage of “extra” smart things that have yearly limits, like Roth IRAs ($6000 per year), 529s (depends on the state), i-Bonds ($10,000 per year)? Fill up “buckets” like fun money or vacation funds? Invest in index funds?

Other related questions: do you prefer a bonus in December or January? Would you rather a salary increase, or a bonus?

{related: financial tips for new lawyers (or other women in their first high-paying jobs!)}

I’m guessing the answer for most people is a little bit of several, if not most of these.

When I was in BigLaw, a lot of people would take a small amount of the bonus (e.g., less than 10%) to indulge in something fun like a major bag purchase or a vacation — and for a lot of people the rest of the money either went to paying down student loans, or paying into a fund for a future downpayment.

{related: cash savings or retirement savings? where to stash your cash when you’re unsure what you’re saving for}

My own “bonus” situation now is a bit weird — even when the site is having a great year like this one, it never feels like extra money because it comes in uneven chunks throughout the year. (Lifestyle creep for the win!)

My husband typically does get a bonus, though, and we’re always happy to get it. (He works for a very small company so it isn’t guaranteed at all.) I often use it for his Roth IRA, as well as to replenish our Vacation Fund. This year I decided to do his Roth IRA stuff earlier in the year (the stock market is on sale, whee!) and so I borrowed some money from our Fun Fund, which I didn’t like doing.

I also decided that we should always be investing in his Roth IRA — after all, you can always take out the your contributions (but not any earnings) after you’ve held the account for 5 years. So, I decided to amortize it, setting aside a specific amount each month. So we don’t actually need his bonus for his Roth IRA this year, and instead we’ll use his bonus to replenish the Fun Fund.

{related: how to save for multiple financial goals}

(We already automatically save monthly amounts for 529s, our health care deductible (sigh), insurance money, and more — I sometimes have a monthly amount going for the vacation fund / or Fun Fund depending on our need at the moment.)

{related: how to automate your savings}

Readers, how about you — are you getting a bonus this year? Do you have a strategy in general for how you spend, save, or invest your bonus? What are your best tips for others on how to spend your bonus?

Stock photo via Pexels / Karolina Grabowska.

The post What’s Your Bonus Strategy? appeared first on Corporette.com.

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