Before you spend your free money on vacation, listen to our tips on how to increase them..
Bonuses, bonuses and cash gifts are a good opportunity to improve your well-being. It doesn’t matter if it is an inheritance, a birthday present or a bonus from work. The most far-sighted decision will be to invest them in order to increase.
Yes, many people want to please themselves when receiving additional income, and you should not refuse it. Just do not spend more than 20% of the amount.
Bonuses. A tidbit that hardly anyone would shy away from. Bonuses are very pleasant to receive, but even more pleasant – to increase. After all, this is the same money as the ones you deal with in a normal environment. Therefore, we recommend that you treat them in the same way as with salaries, investment savings and your other cash assets..
The advice that we will give you now is equally applicable to self-made businessmen and ordinary working people. These are really useful and working tricks..
This bonuses handling guide has been prepared using information from the following two expert scientists:
• Andrea Coombs – Investment and Retirement Specialist for NerdWallet. He has already spent 16 years helping people better manage their finances..
• Michael Allen – Wealthsimple portfolio manager who helps develop the business strategies of Business Insider clients.
Let’s start with the basic rule from Coombs: if you received a bonus, first remove it from your wallet. Or from the card that you use to pay for purchases, going to the movies, etc. Otherwise, you will not only lose this money, but you will not even notice how it happened. After that, follow our tips on how to spend the premium correctly..
1. Get Rid of High Speed Debts
If you pay double-digit interest on some kind of debt (this is especially true for consumer loans and cards), use your bonuses to pay them off. Your first priority in any situation should be to close debts if their interest rate is higher than the potential earnings of this money.
For example, if the historical long-term profitability of the stock market is approximately 7.5%, and your credit rate is 30%, then you are in the red, your money works for the bank, not for you.
Michael Allen recommends that his customers pay off debts with a rate of 5%. And keep track of your total debt. “We advise our clients that they maintain a debt to income ratio of not more than 2.5 to 1. Multiply your income by 2.5 times. If this number is less than your debt, it’s probably worth it to pay it off. ”.
We seriously, close loans with bonuses and your income will increase, only because you will not have loans.
2. Create a personal reserve fund
How to spend the bonus? – just set it aside and this will allow you to save money in case of unforeseen circumstances. Allen recommends storing a financial “airbag” in the form of an amount that lasts for 3-6 months of residence. This will give peace of mind in case of loss of work, family, personal problems, health problems, etc..
Coombs also says it’s nice to keep money in case of sudden expenses. It could be a broken refrigerator or gearbox in a car. When any of this happens, you will not need to get into high-interest debt to correct the situation. These one-time expenses periodically arise for everyone, but they do not have to be included in the monthly spending plan. Just keep track of your reserve fund.
Where to keep such a fund? Allen recommends keeping it separate from the money you use for your monthly expenses. Savings deposits are good.
3. Make long-term investments
Tips on how to spend the premium will not do without it. It is difficult and reluctant for people, especially young people, to think about retirement, because there are still several decades ahead. But they have there is this amazing asset whose value they underestimate is time. Because money grows over time.
What is the best place to start? By replenishing your retirement accounts or opening an investment account. Pay attention to long-term investments with high reliability – the stock market will make your money work and increase.
4. Spend your money on the “tool”
Allen suggests that as long as you are not dealing with large debt obligations (at high interest), you can spend 15-20% of the extra income on “working amenities”. If you are a graphic designer, buy a new plugin or version of the program you are working on. If you are a photographer, consider purchasing new photo accessories to help you take better pictures. You are a manager, then pay for a continuing education course. The new working solutions that you buy at a premium will allow you to more efficiently carry out your business and, as a result, increase capital in the future.
Similar entries:
Similar articles
- How to lend money and get them back.
The transfer of money for temporary use (on loan) is in most cases carried out between acquaintances and close people who do not burden themselves with legal…
- How to separate personal money and business money.
Many entrepreneurs are familiar with a stressful situation when there is not enough money to run a business or to satisfy personal needs, especially if…
- How to save money at any salary – Strategies and Tips
Everyone knows what to save for retirement, major purchases or education. But not everyone can do without a daily cappuccino from a nearby coffee shop or hike….
What are some effective ways to wisely utilize bonus, bonuses, or any extra money received? Any investment recommendations or financial strategies to make the most out of it? Open to suggestions!
What are some practical ways to wisely spend a bonus, bonuses, or any unexpected windfall? I want to make sure I’m making the best use of the extra money instead of squandering it aimlessly. Any tips or suggestions on how to allocate and prioritize spending wisely would be greatly appreciated!