Late December into January is usually when many employees receive a year-end bonus thanking them for their hard work in 2016.
If you're fortunate enough to get a bonus, follow these three tips to make sure you put that money to good use.
1. Max out retirement accounts
Use your bonus check to max out your yearly retirement account contributions if you haven't hit those limits yet.
While you might be investing throughout the year, a bonus check is a nice way to catch up or simply top off your 401(k) or IRA. According to the IRS, you can contribute a max of $18,000 to your 401(k) and $5,500 between all your IRAs (or $6,500 if you're 50 years or older).
You'll have until April 17, 2017, to max out your retirement accounts, so you still have some time to make a decision.
"Use your bonus check to max out your yearly retirement account contributions."
2. Have an enjoyable experience
Consider using a bonus check to pay for a relaxing and fun experience, such as a winter vacation. After a long 2016, you deserve some time to yourself to recharge.
However, you should only book a trip if you have your finances in order. This means you have very little to no high interest credit card debt. Additionally, make sure your savings goals are in order because you don't want to book a vacation when that money could have been set aside in your Individual Retirement Account or emergency savings fund.
Booking a vacation with your bonus check is a good financial move because you won't have to rely on credit cards to pay for the trip. This way, you'll be able to enjoy some relaxation and avoid building debt.
3. Save for a big purchase
Once you've mapped out your savings goals for 2017, make a list of big purchases you'd like to make. Your bonus check might cover one of those goals. Big purchases could be a new roof, computer or anything else that requires a few months of saving money.
If you don't want to save for one specific purchase in 2017, split up the bonus check to cover multiple goals. You'll be able to hit multiple ambitions throughout the year instead of one or two.
If you're lucky enough to receive a year-end bonus check, consider saving the money or spending it on a relaxing trip. You can even enjoy the best of both worlds by planning for the future and enjoying the present.
For more information about smart ways to manage your finances, contact Landmark Bank.
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