June 30 marked the official end of the first 6 months of 2010. This means that some of us DINKS will be receiving our semi annual bonus very soon.
What should I do with my sales bonus? It is a troubling question that I ask myself every June and every December when my bank account grows just a little bit more. Of course I lose half of my gross bonus to taxes, but it still leaves me with a little something.
Here are Five Great Ways to Spend Your Semi Annual or Annual Bonus. I have also included 3 Red Flags of What Not to Do With Your Newfound Cash Flow.
Helpful Hints on How to Spend Your Bonus:
- Pay Off Your Debts. Make a lump sum payment on your mortgage. Inquire with your financial institution because sometimes prepayments can be costly. Pay off a credit card. If you have a remaining balance that can be paid off in full from your bonus…Do it. Or if you have a large balance at a high interest rate, pay that off first.
- Contribute to your 401K or Your RRSP for our Canadian friends. Saving for retirement at a young age is a fantastic savings strategy because the money grows tax free over several years. Compounded interest, dividends, and capital gains are always good investments.
- Take a Trip. It’s a good time to travel because prices are low. You can get great deals on vacations because the tourism industry is hurting in this economic crisis. Booking online is a good idea. Hotwire.com has recently been very successful for two of my coworkers. Once you arrive and you check in, try to negotiate for a better room or a better view.
- Put ½ into Savings and Spend ½. I am a firm believer of the half/half rule. You shouldn’t save everything because you may urn for some retail therapy. However, on the other hand, you shouldn’t spend everything either because you will regret it later. You work hard for your money so enjoy it….just not too much.
- Upgrade Your Home. It is an expense that will become an investment later on. Redecorating or upgrading even a single room, such as your kitchen, can substantially increase the value of your home.
What NOT to Do With Your Bonus:
- Spend It All on Material Goods. Spending a lot of money is like waking up from a one night stand with a hangover. You think to yourself “what the hell did I just do?” Remember that once the money is spent, you can never get it back.
- Lock it all up. I often suggest investing over the long term, as long as the investment goal permits to do so. Often, but not always. Too much of one thing is never a good thing.
- Put it into a Cash Savings Account. Letting money sit at an annual rate of approximitley1% is not a good idea. Make a plan and invest in different options depending on your different goals. Diversify between registered and non registered investments, as well as interest, dividends, and capital gains.
(Photo By RefractedMoments)