The Best Way to Grow Your Money and Bonus for 2019

By Kevin Brauer, Chief Financial Officer, Affinity Federal Credit Union

The end-of-year bonus is a hallowed holiday tradition in many companies. At a time of year that’s all about giving (and splurging), it’s tempting to see a bonus as purely disposable income. While it’s expected that you’ll engage in merriment and buy presents for loved ones at this time of year, you shouldn’t get in the habit of detaching your bonus from your overall financial planning.

Grow Your Money and Bonus

A bonus gives you the opportunity to meet some of your short OR longer-term financial goals. In case you’re wondering what constitutes a short-term goal, saving ten percent of income every month would be an example. A long-term goal would be to pay off all student loans within five years of graduation. Personally, I would rather take the opportunity to let a bonus benefit my future, but the opportunities for saving are truly endless. Also, what works for me may not work for you, which is why it is paramount to find the personalized financial planning tips that suit your life!

While you have the option to spend and save as you wish, there are six considerations you should have in mind for growing your money and making your bonus pay dividends in the future.

6 Ways to Use Your Bonus to Save (and Grow) Your Money

1. Saving is the name of the game. That’s why it’s so important to save for big purchases like a car or a down payment on a house. If you need funds soon, use a savings, certificate or money market account to keep everything liquid and more accessible. Never forget that while we all want the big-ticket items immediately, there are foundational steps needed to get there. This means that you may have to wait for big purchases or adjust the types of accounts you have.

2. Preparing for the unexpected keeps you out of hot water. Big ticket purchases aren’t the only expenses that benefit from building a foundation. Emergency funds are essential for financial wellness because it’s truly impossible to know every surprise life may throw your way, including things like healthcare bills and car repairs. Stashing cash aside for the unexpected will allow you to navigate these scenarios with less stress.

3. Helping out your children and grandchildren now can save you money in the future. You can use money from your bonus to start, or add to, a 529 College Savings Plan. Saving a lump sum over a longer span of time gives your money the power of compounded interest. This also lets you make more on your earnings, which can be a powerful tool when you’re hit with those hefty tuition bills.

4. Making extra principal payments is a good idea. Make an extra principal payment on your mortgage or other loan and reduce the overall interest. This could potentially save you a significant amount of money in the long run and become a best way to grow your money.

5. Keep that credit card debt at bay. To pay down credit card debt, and consolidate debt overall, get ahead of the game and free up money in the future for savings or other expenses. This can be done by paying down one or more of your high-interest debts.

6. Retire by the fire. You can start or add to your retirement savings plan and save more on your bonus by deferring taxes in your employer’s retirement plan, or by opening/contributing to an IRA. If you keep this in mind when saving, you’ll be kicking your feet up by the fireside in no time!

No two people are exactly the same in their financial priorities, options and limitations. Accordingly, each individual who reads this article will have to decide which consideration best suits them. But the main point to keep in mind is that your bonus doesn’t have to be an end-of-year treat that will vanish on January 1. Your bonus can go a long way toward benefitting your life and future in 2019. So, enjoy your end-of-year festivities – and remember, making prudent choices today can pay off in the year to come!

This information is for informational purposes only and is intended to provide general guidance and does not constitute legal, tax, or financial advice. Each person’s circumstances are different and may not apply to the specific information provided. You should seek the advice of a financial professional, tax consultant, and/or legal counsel to discuss your specific needs before making any financial or other commitments regarding the matters related to your condition are made.  

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