How will you spend your end-of-the-year bonus? Do you want to use it in a way that maximizes its value to protect your growing wealth? If so, here are a few ways to do that no matter what size your bonus is this year.
1. Max Out Retirement Contributions
Give your retirement planning a shot in the arm by contributing your bonus — or enough of it to hit the contribution limits — to any retirement plan. You might increase the percentage taken for your company 401(k) plan, open or contribute to a Roth IRA, or add to a traditional IRA. Hitting the limits on this year's contributions? Fund next year's contribution on January 1.
2. Pay Off Debt
This is an oldie but a goodie when it comes to using a windfall. Reducing the amount of debt, or leverage, in your financial portfolio is usually a good idea with a great return. However, only spend extra on this if that debt is at a high interest rate. Low or zero-interest-rate debt can be very good debt to make use of.
3. Find Passive Income
is one of the best ways to secure your financial freedom. It could come from a managed rental unit, vacation rentals, royalties from music or written works, investing in a local business, or just investing in dividend-paying stocks. Use your bonus this year to start building that lifelong income source.
4. Buy Insurance
Insurance isn't the sexiest part of financial planning, but it's vital. Assess where you might have holes in your safety net. Do you carry good health insurance? Should you add life insurance to protect your dependents? Is your property protected by flood, hurricane, or earthquake coverage? Perhaps it's just time to update the value of your assets. Whatever the hole, plug it with your bonus.
5. Meet With a Planner
Finally, what if your bonus isn't as large as you wish it were? One of the best investments for a modest bonus may be to meet with a financial planner. A professional will help you find the best route to meeting your goals, minimize weaknesses in your finances, and make a plan for the upcoming year.
Where to Start
How should you deploy your bonus this year? Find the right path by making an appointment with a financial planner or wealth management professional in your area today. No matter what you choose, you're on your way to a healthy, growing portfolio before the year's end.
