What Should I Do With My Bonus?

Full Transcript:

It’s been a tough couple of years with low to no raises and no bonus last year. Finally, you get some good news as the Shell bonuses are looking great with a business performance factor of 1.5. Let’s talk about the best uses for your bonus.

You can do three things with your bonus. You can spend it, save it, or donate it. Let’s first touch on donations. I do not recommend that you directly donate cash from your bonus. To learn why, watch my video on smarter gifting posted at NewHeightsPlanning.com.

Next, let’s talk about spending. You’ve worked hard to earn your bonus. Make sure that you enjoy some of it. When spending some of your bonus, be intentional with how much of it you spend and make sure that you are spending it on something that will bring you the most amount of joy.

Lastly, let’s talk about savings and the order of operations for your savings. First, make sure that you have an emergency fund that will cover three to twelve months’ worth of expenses. After that, pay down any consumer debt that you may have. This will be debt like credit cards, personal loans, and auto loans, especially if they carry a high-interest rate.

Next, save for retirement. You can use your bonus to fund a backdoor Roth IRA. You can also contribute up to 50% of your bonus directly to your 401(k). A great benefit of Shell is that Shell will also contribute to your 401(k), based on your bonus. After retirement savings, I recommend saving for college in a 529 plan. Now, if you’re doing these four things, you are doing great. Congratulations.

If you still have money left over, let’s talk about two more steps. Next, invest the money in a taxable brokerage account and pay down any remaining debt that you may have. This will be debt like your mortgage. Now, how do you prioritize these two is a personal choice. Doing one or both of them is a great way to set yourself up for future financial independence.

If you’d like to learn more about your specific situation, please reach out to me for a complimentary 30-minute consultation.