Whether your employment bonus check was expected or not, you now have some extra cash in your hand and a few decisions to make. When a bonus check comes into your life, it might be tempting to splurge on big ticket items or a fancy vacation. But just maybe there are some more responsible uses for that money, though. Here are just a few ideas of things that you can spend your bonus money on and some wise investment tips.
We all deserve some reward, right? This doesn't mean that you should spend your entire bonus on a trip to Hawaii or a down payment on a new sports car. But, if you've been dying for a weekend away or some new fancy gadget for your kitchen, it's ok to spend a small portion of this bonus on some short-term gratification. The rest, however, should go towards achieving your long-term financial goals.
Eliminate High-Interest Debt
Do you have any high-interest debt, such as credit cards? If so, use your bonus money to pay off these items first. The average credit card debt for households that carry a balance in the U.S. is a whopping $16,048. With average interest rates topping 16%, you'd be paying more than $2,600 in interest alone each year. Get rid of this expensive debt.
Re-Allocate Your Portfolio
Having a bonus check in hand is also an excellent time to take a look at your investment portfolio. Let's assume that you trade individual stocks and want more diversification. It costs money to buy and sell with any broker, so you can better diversify by making additional purchases with your new windfall.
You should also take a close look at your retirement savings accounts. If you have a 401(k), your company might not allow you to make additional contributions with your bonus money, but you can certainly ask. Also, check the IRS's latest limits for annual 401(k) contributions. If you're maxed out with your 401(k), you may still be able to invest in a separate IRA account.
Save for Children's College
If you have children, college will be here before you know it and it gets more expensive every year. Start saving early with a tax-advantaged 529 plan. Some states, such as Florida, Maryland, Texas, and Massachusetts offer easy to use college savings programs, which guarantee tuition rates.
Buy a Life Insurance Policy
If you've been putting off purchasing a life insurance policy, now is the time to finally make that commitment. Not only is life insurance essential protection for your family, but it's also incredibly affordable. The average annual cost for a 20-year term life insurance policy worth $250,000 is just over $300 if you're a non-smoker in your mid-twenties.
A life insurance policy can provide valuable protection for your loved ones should an unforeseen event happen. Family members can use proceeds to replace lost income, pay off debts, and even cover college expenses.
Getting a bonus check is exciting, but what's not such a thrill is having nothing to show for it soon after. Carefully consider how you will use that money to achieve some of your long-term financial goals. Ready to purchase an affordable life insurance policy? Contact us now to start a quote.
Knowledge is power. The more you know, the easier it is to make an intelligent choice. Everyday life, as well as certain events and circumstances, require you to make choices. And peace of mind is gained when you feel good about the decisions you make.
When it comes to life insurance, IntelliQuote is there for you to make the intelligent, well-informed choice. From term life insurance to universal life insurance and final expense insurance, we make it easy for you to compare, shop and save. Get multiple quotes now and make the intelligent decision for Life.