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- As we approach the end of the year, some workers will be receiving a bonus from their employers.
- I asked a few financial planners if they had any advice on what to do with it.
- You could save for retirement, emergencies, or pay off debt, but you should also spend some on fun.
- Check out Vanguard Personal Advisor Services® to get the investment advice you need to help build the life you want »
As we say goodbye to 2021, many of us could potentially be presented with an end-of-year bonus at work soon. If you find yourself in possession of a bonus, you might want to have a game plan of how you will use it.
If you have robust financial goals, putting that bonus toward those targets could be a good way of advancing your overall money situation. I talked to four financial planners and advisors about what some good moves for your end-of-year extra paycheck might be.
1. Put it aside for a rainy day
While you might want to use your bonus to go on vacation or take an expensive shopping spree, financial planner Robert Hartinger, recommends saving some or all of it for any unexpected expenses you might have in 2022.
Hartinger gave emergency funds and unexpected tax liabilities as examples of things you might potentially need it for.
2. Pay off your debts
Financial planner Jay Zigmont suggested that another thing you can use your bonus for is paying off outstanding debts .
"Take $100 of the bonus and treat yourself, but then use the rest to pay down debt," said Zigmont.
"Your bonus isn't 'free money' or just something you can play with," he added. "Use it to get to your goals, and for most people that includes paying down debt."
3. Contribute to your retirement plans
Financial advisor Greg Wilson recommends using some of your bonus to contribute to your 401(k) , IRA , HSA , or other retirement plans.
"This will help lower your taxable income," said Wilson. "This may be especially important this year, depending on what comes out of the looming Social Spending Bill."
4. Use some of it to reward yourself
Even if you have a lot of financial goals, financial advisor William O'Donnell believes in using some of that bonus to treat yourself.
"Reward yourself with 10% (at most) of the bonus," said O'Donnell. "Life can be real drudgery if you can't celebrate a bit."
As for the rest of the cash, O'Donnell suggested investing the money in something consistent with your goals, values, and risk tolerance.
Via PakApNews