Not many of us receive a bonus at the end of the year, but if we do we should prioritize what we allocate the funds for. Using your annual bonus money can be an excellent opportunity to improve your financial situation.
Whether you want to lower your debt, increase your savings, or increase your retirement fund, there is plenty of ways to improve your financial situation. With a small plan, you can use your bonuses to set yourself up for financial success.
This will all depend on the amount you will receive as your bonus. You are able either to divide your bonus money equally across multiple expenses or invest and just use it for a specific reason.
No matter which way you decided to use your funds you should always asses your situation first and decide where the money will have the best impact on your life or future. Bonuses can really benefit your life and help you set up your future for success.
Here are intelligent ways to utilize your bonus funds:
If you have acquired a larger amount of debt over the years, using your bonus money can be a smart move to improve your financial situation. Having high unsecured debt is expensive and mentally draining.
Paying down high debt can help you save money, increases your credit score, and improves your overall financial situation. Which in return can decrease your stress levels and improve your relations ships.
Depending on your bonus it might not be enough to resolve all your debt but it can definitely put a large dent in your debt cutting hundred off your debt.
Another option to consider if you are not able to pay most of your debt would be to acquire a debt consolidation loan or a personal loan to replace your high-interest debt with a lower costing loan. Here are a few ways solving your debt can help you:
Reduces your stress: Debt can play a big role in your mental health. Many individuals when in debt experience stress, anxiety, and even depression. This can play a big role in your in you life and might not only affect your personality but the ones close to you.
According to a survey conducted by the American Psychological Association money will be the most common source of stress with 72% of adults feeling stress. When someone has a large amount of debt it can be overwhelming to think about how you’re going to make the payments on time every month.
This can really impact your sleep, relations, and form even your health. Stress might cause headaches, muscle tension, difficulty sleeping, bad appetite, and even drug use which will cause overall unhappiness in your life.
Having a plan or paying down your loans with your bonus can lead to improvement in your life physically and mentally.
Having to constantly worry about paying your bills can have a big mental drain for most and removing that burden from your chest will help you breathe easier. Cutting stress out can be a big benefit for your life and a good way to spend your bonus.
Improves your credit score: Having a good credit score is crucial in improving your stability and security. High credit scores can increase your chances of securing loans, credit cards, auto loans, and even mortgages with the best terms available.
This will help you save money on your loans over time and decrease your payments. If you have a large amount of debt it will be challenging to maintain a higher credit score. Having debt can make it difficult to make your payment and missing your loan payments will negatively impact your financial account.
While making timely payments will help your credit score grow. But the main reason you should aim to have a perfect credit score is because of the saving you will receive from having the best terms.
For example, if you’re buying a $20,000 car with 5% interest and a 5-year loan. You will end up paying $2,645.20 in interest, but if we use the same equation but change it to 10% interest you will end up paying $5,496.40 which will be a $2,851.20 difference.
Having a good credit score will not only have a good impact on your savings but help you get the lowest payments making it easy to budget for.
Saves you money: Having debt or large payments every month can play a significant burden on your life and finances. Having low debt in return will increase your credit score which in return lowers your interest charges and fees that you will pay.
For example, if you have a $10,000 balance with 20% interest will add up to $2,000 in interest, but by paying down your loan you can eliminate that yearly interest saving you money.
Carrying debt with a high-interest rate will cost you a fortune and you should pay it off or consolidate it into a smaller loan increasing your savings. Also eliminating your debt will increase your credit score and create a chain of savings for insurance rates, loans, credit cards, rentals, and utilities. It is important to pay off your debts to increase your savings.
Achieve financial goals: Having your financial goals met is essential for having a successful future. But having a lot of debt can decrease the chances of you achieving your goals.
For example, if you’re ever trying to buy a home you will need to have a larger down payment but having a lot of debt will decrease your credit score which will increase your interest and payments. This will have a domino effect which in return can decrease your chances of getting a loan.
Having high debt can decrease your success in many things such as starting a business, saving for retirement, and many other arrears of your life. Paying off your debt will help you have enough allocated funds which in return can help you achieve your financial goals.
Improves relationships: Debt can often lead to stress and anxiety which can affect your relationship with others. This might be the case for everyone but having a lot of stress will make you more aggravated towards your closed ones.
For example, if you constantly worry about making a payment on time you will be distracted and distant from your partner. This will lead to arguments and misunderstandings which can strain your relationship.
Also being financially strapped will affect your spending time with your significant other such as going out, having date nights or even paying for small surprises. This can lead to having fear of mission out which will damage your relations ships with friends. Paying down your debt will help your finances and the relationships around you.
Emergency funds should be an important aspect of financial planning and using your money to increase your savings will be a wise move. One recommendation by many experts is to have around six months of living expenses in a high-yield savings account.
This will help your finances just in case of unexpected expenses such as a job loss or even any other emergencies. Life mishaps can happen to anyone which will lead to a lot of financial strays for individuals and even bankruptcies.
You should always have some money put aside for example your monthly expense is $4,000 so you should have anywhere from $12,000-$24,000 in your emergency fund. This will decrease the stress of being worried about missing work or paying bills on time.
Let’s say you have $10,000 in your savings account and you have a medical emergency. The doctors require $5,000 to cover your expense and having that emergency fund will help you cover the cost without putting too much stress into your life.
Using your bonuses to grow your emergency fund is a smart move for many to protect their life.
Putting away a portion of your bonuses towards investing in yourself can have a big impact on your future. Here are different ways in which you can use your bonus money to enhance your personal life such as:
Professional Development: Investing in your job or career development by using your bonus can increase your skills and knowledge. This will lead to higher job quality which will potentially increase your earnings.
Visiting professional conferences or getting one on one training from industry expense will open up new opportunities. Getting new skill or new technology can make you a more valuable asset to your company which adds job security and usually make you more eligible for promotions.
Don’t look at spending your bonus on development as a waste of money but as an investment in yourself making you more productive or learning skills that can increase your pay.
Personal wellness: Taking a break from the constant hustle is important for your mental health. Using your bonus to take some time off or take a trip will help you reduce stress and increase your overall happiness.
Outdoor activities you enjoy can provide relaxation. Pursuing a creative outlet such as painting, cooking, and meditation classes. This will disconnect you from the work line and fulfill your personal life. Having an outlet or a hobby to allocate your time to will also add benefits to your life.
receiving a bonus can be a great opportunity to improve your financial situation. It can be used to pay down debt, increase savings, or boost your retirement fund. When deciding how to use your bonus funds, it’s important to assess your financial situation first and determine where the money will have the greatest impact on your life or future. One intelligent way to use your bonus funds is to pay down debt.
This can reduce stress, improve your credit score, save you money, and help you achieve your financial goals. Eliminating your debt can also lead to better relationships with others as it can decrease stress and anxiety in your life.
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