Bonus season always spark spending ideas such as buying a new phone, going on a holiday or upgrading your car. While it’s great to use your hard-earned bonus to reward yourself, it’s still important to spend your bonus intentionally and have a strategy to make sure you put yourself first.
Sure, in the short term, buying something nice could mean putting yourself first. But we’re talking about putting yourself first by taking care of future you. Here are some ways you can use your bonus to put yourself first in the long run.
Pay off bad debt
You can use a portion of your bonus to get rid of lingering credit card debt. With many credit cards charging upwards of 15% in interest, the bad debt can accumulate quickly over time and seriously hurt your financial future. So, get rid of any credit card balances as quickly as you can to reduce your debt burden.
Build your emergency fund
You can’t predict when accidents and disasters might happen. If you aren’t prepared for when your car breaks down or a medical emergency, it can put a real financial strain on you. Consider using part of your bonus to build or add to your emergency fund. Typically, you should have at least 3 to 6 months of living expenses in your emergency fund to prepare you for life’s curveballs. Keep your emergency fund in a liquid savings account so that you can tap into the fund quickly if you need it.
Increase your retirement contribution
After paying down your debt and adding to your emergency fund, put yourself first by making your bonus work for future you. If you haven’t started thinking about retirement, a bonus is a great way to kickstart your retirement plan. Investing a lump sum accelerates the compound interest effect of your money, making it easier to reach your retirement goals.
When it comes to investing in your retirement, always account for your time horizon and risk preference. Take the time to find investments that align with your risk tolerance instead of putting your bonus in a generic investment product. If you aren’t comfortable with high risk, don’t be overly aggressive with your retirement investing. You don’t want to end up losing sleep over your investments. Remember, retirement is a long-term game that rewards you for staying the course on your terms.
Put money towards your big life goals
If you still have money left over in your bonus after adding to your retirement savings, emergency fund and paying down your debt, craft a plan to chase other life goals as well. Thinking about putting a downpayment on a house or starting a business in the near future? Put your savings plan into action with the extra cash from your bonus.
Treat yourself and have fun
After contributing to all your financial goals and putting yourself in a better financial position with your bonus, now’s the time to reward yourself, you’ve earned it! Take a small portion of your bonus, maybe 10% to 20%, to treat yourself with a shopping spree, donating to charity, or spending on a holiday. Whatever you fancy, treat yourself and others so that working hard for that next bonus will be a fun and rewarding journey for you. Head on to StashAway’s website to find out more today. There’s even a special promotion for Graduan readers! As always, please conduct your own research before investing.
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