You worked hard all year long and your company rewarded you with a bonus. Congratulations! Your first instinct may be to rush out and spend the whole thing on that big-ticket item you’ve been craving.
But before you do, consider these smart ideas to use your bonus money to meet both short- and long-term goals.
1) Create an emergency fund
Experts say every adult should have an emergency fund, which typically means cash sitting in a savings account. Your fund should have enough money saved to pay your living expenses for six months while you search for a new job.
You can also use the fund to pay for unexpected expenses like a major car repair or refrigerator failure. Remember — don’t spend the money unless it’s a real emergency.
2) Pay down debt
Paying bills is never a fun way to spend money, but think about how much less pressure you will feel when your high-interest credit card bill isn’t gobbling up your monthly paycheck.
According to Wisebread.com, if you only pay your $50 minimum monthly payment, it can literally take over 15 years to pay off a balance of about $2400 with a rate of 12.24 percent. And that’s assuming you don’t charge anything else on the card — ever!
3) Save toward a goal
Whether you are hoping to buy a new car, take a trip or pay for college for yourself or your kids, you’ll always be ahead in the game if you have the money in the bank before you make the purchase.
So concentrate on your long-term plan and visit some travel websites to build excitement while your bonus check earns interest toward your future good times.
4) Get the most from your bank
This tip can piggyback on top of idea number three. Depending on your bank and how much you are able to save, you might be able to get a better interest rate on your savings because of your growing bank balance.
Talk to your banker and shop around to different banks to find the best savings account for you.
5) Save for retirement