The holidays are always intended to be a time of good cheer. For a lot of Americans, that is indeed the case due to the fact that a lot of employers provide employees with holiday cheer in the form of bonuses. With the holiday season here, this is a good time to discuss bonuses and how they can impact the lives of recipients.
If you have received or anticipate getting a bonus this year, it’s a little extra money in your pocket that you may or may not have planned on getting. Assuming it may come as a surprise, have you thought about what you are going to do with the proceeds? If not, you might benefit from some sound advice. Remember, getting an unexpected bonus provides you with a unique opportunity to do things financially that you might not otherwise be able to do. If it’s reasonable to expect you might get a similar bonus every year, this information might remain relevant. Let’s discuss.
Savings, Savings, Savings
If you receive unexpected funds from an annual bonus, it’s reasonable to expect you have not included said funds in your personal budget. That usually means those funds are not earmarked for a specific purpose. Why would you not use this opportunity to boost your savings?
It’s understandable that your first instinct might be to treat yourself to a vacation or to buy yourself or family things you couldn’t otherwise afford. Is it possible that you could do both? Of course, it’s possible. It’s really just a matter of deciding whether you want to invest in your future or not.
The right thing to do would be to set half aside at least half your bonus for savings and use the remaining portion on something that would bring you and your family a little pleasure. With the savings, you’ll find you have a lot of flexibility with how you use those funds to provide for your future.
What You Can Do with Your Bonus Monies
If you are fortunate enough to work with the expectation of receiving a decent bonus every year, you would be amazed at how fast your bonus monies can accumulate from one year to the next. The larger the amount grows will go a long way towards determining just how much flexibility you have with your savings.
Here’s a potential scenario. Let’s say you have a reasonable expectation of getting a $10,000 annual bonus over the next five years. If you were to save half of that every year, you would have a savings of $25,000 plus any investment earnings you can accumulate on top of that amount. That’s actually a lot of money. Here are some of the things you can do with that extra money:
- Put a down payment on a house
- Cover a child’s education
- Purchase a car with cash
- Invest in a business venture
- Pay off old debts
- Continue investing towards retirement
- Cover emergencies
Some of these options are life changers and certainly should pique your interest. As for the last option, you surely realize emergencies are going to occur in your lifetime. Are you in a position to financially deal with emergencies?
Handling Emergencies Without Resources
Whether you have savings or not, this is an opportunity to make sure you have thought of your alternatives to cover unexpected costs.
If you do find yourself in an accident or unexpected tragedy without adequate savings, you need to know what other options are available. Some of those options may include applying for short term loans online, borrowing against something you already own like your house or car, getting a cash advance from a credit card, or taking out a new line of credit. All of these options will force you to redefine your current budget in order to pay back what you borrowed – so having savings available will actually save you even more money in the long run.
Taking the above discussion under consideration will hopefully motivate you to consider saving a good portion of any bonus you receive this year. You’ll never be sorry that you saved money. Can you say the same about spending all you have?
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