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4 Things a Financial Planner Recommends Never Doing With a Bonus

Our experts answer readers’ investing questions and write unbiased product reviews (here’s how we assess investing products). Paid non-client promotion: In some cases, we receive a commission from our partners. Our opinions are always our own.Getting a bonus at work can be exciting. Extra unexpected money dropping into your bank account gives you ideas of splurging on things you don’t normally buy.However, as a financial planner, I always recommend being deliberate when it comes to your annual bonus. Striking a balance is always smart — while you can have some fun and treat yourself, you should consider spending a portion of those bonus dollars building your long-term financial security.The key is to avoid using a financial windfall on overpriced status items, things that enable ongoing excess spending, or poor investment decisions. Instead, you should focus spending on reasonable purchases that improve your life, secure your finances, or work toward your long-term goals.Here are four things you should avoid buying with your hard-earned bonus money — and some advice on what you should do with it instead.Sure, a shiny, new car seems exciting, but it’s probably one of the least financially smart decisions you can make. For one, a car’s value drops quickly, making the resale value drop over time.Plus, if the car is more expensive than your old one, you may be on the hook for higher car insurance payments, potential repair bills, and costs like gas and parking. These costs can add up and crunch your budget long after the bonus money is spent.If you’re in need of a new set of wheels, consider buying quality used vehicles outright without expensive car loans.Running out and buying the latest and greatest new TV, phone, or laptop is tempting. But technology changes and upgrades so rapidly that pouring bonus money into flashy new gadgets often means buyer’s remorse sets in fast.Instead, use bonus cash for necessities or investments that have staying power, not discretionary tech upgrades that will soon feel outdated.Using your extra cash to get in on the world of speculative investments can seem like a good idea. But it’s never a good idea to use your money to invest in something you don’t know enough about, or that doesn’t have a track record of strong gains.Many trendy investments come from hype rather than substantive information. Internet chatter can create powerful short-term forces, but these moves often aren’t sustainable. Just because an investment goes viral doesn’t mean it has strong fundamentals to support stable long-term growth.You worked hard to earn your bonus, so it’s time to make it work for you.Stashing your bonus in a basic savings account might be appealing for safety, but most interest rates on these accounts are very low. Plus, that money could stagnate and lose purchasing power over time due to inflation.Instead, consider putting that money in a high-yield savings account, which boasts much higher rates and can maximize your savings over time. Plus, most high-yield accounts are just as accessible and secure as traditional ones.A bonus check allows you to enjoy life — whether booking a flight or buying a nice meal. But it can also help you strengthen your overall financial foundation. I recommend putting at least half of your bonus money toward your financial goals, which might include:Paying down debt: Using your bonus to pay down high-interest rate debt like credit cards or personal loans can save you a lot in interest costs. Reducing what you owe lifts a financial burden long-term and frees up cash flow to redirect toward other goals.Building an emergency fund: Putting bonus funds into a rainy day account with at least three to six months of basic living expenses protects you during unexpected crises like job losses.Investing for retirement: Even if retirement seems forever away, starting to invest bonus funds in your retirement plan now leverages time via compound growth. Let your money work hard for your future self.Unexpected bonus money feels incredible to receive. But make sure you’re using it wisely so that short-term excitement doesn’t result in long-term financial regret.

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