I used to work for a business that gave out end of year bonuses every year. Granted, some years it was a lawn chair, umbrella, or a blanket displaying the company name. But some years the bonus every employee received was monetary.
Whenever the bonus was money I usually hung onto it until I figured out how to best use it. But now, looking back, I have no memory of how I used that money. Sadly, at the time, it never crossed my mind to use it in ways that would benefit me the most.
If you’ll be receiving an end of year bonus this year, don’t rush out and spend it immediately. Think it over first and carefully consider the best used for an end of year bonus.
Using an end of year bonus to invest isn’t as glamorous as taking a vacation or buying something you want. However, consider the long term benefits investing can provide you.
You can use the extra money as seed money for investing. This is a way to grow your end of year bonus into a much larger sum.
Invest in stocks with the help of a robo-advisor. Or, try pooling your money with others in crowd-funded real estate. There are lots of ways to start investing even if you don’t have thousands of dollars at your disposal.
Build an Emergency Fund
Do you have an emergency fund and could it pay your monthly bills for a time? Most experts recommend having enough in it to cover six to nine months of bills. If yours isn’t that big, or is non-existent, use your end of year bonus to build it up.
You never know what life is going to throw at you. Sometimes the refrigerator quits, or your furnace dies with no warning. When those unexpected things crop up, some people resort to using a credit card.
But if you’re trying to pay off debt, the last thing you want to do is add more to it. Having an emergency fund can save the day and keep a bad financial situation from becoming worse.
Instead of spending bonuses on frivolous things, like smart phones, TV’s, or fitness trackers, save it for a rainy day. Splurge in small ways as an alternative. Then, when unplanned bills come up, you can cover them without causing financial setbacks or using credit cards.
Paying off debt is another great use for an end of year bonus. Rather than spending your hard earned bonus in a way that you won’t even remember next year, use it wisely.
Start by applying your cash windfall to the smallest debt you have. Keep momentum by getting rid of bad habits and using the extra money to pay off that debt first.
Once that bill is paid, start paying off the next smallest outstanding debt. Use any extra money in your budget, plus what you would have paid on the other, now paid, bill.
Continue using this methodology until you are living a debt free life. You’ll experience a financial freedom that relieves stress and opens up new possibilities, such as travel or retirement.
Will it happen overnight? Of course not. In fact, it may take years for you to achieve that financial freedom. But it can be had if you get things started by using your end of year bonus to your advantage.
Start a Business
Another great way to use an end of year bonus is to start a business. Obviously it may not be enough of a bonus to start some businesses. However, if you set the money aside and add to it when you can, it could help you have a more secure future.
Having a business can help you build greater wealth for your future retirement. It can also help you achieve other goals, such as travel or saving for your children’s education.
Getting an end of year bonus is a great benefit. But there are better ways to spend it than buying more stuff. Try one of these uses for an end of year bonus to get the most out of it. In the long run, you’ll be glad you did.
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Do you get end of year bonuses where you work?