B-O-N-U-S!!!
A single word that makes every employee of a large corporation happy – to hear that on top of their normal salary, they’re getting a nice extra chunk of change. Cha-ching. Whether it’s a few hundred dollars, or a few thousand we’re all for it!
That extra influx of money that usually hits this month is the opportunity people have waited for to be luxurious. It could be the one time they get to spend beyond their means because well, this is extra money that didn’t get budgeted anywhere! Unless you’ve already spent it – then you can ignore this post.
Pat yourself on the back because you deserve it!
Can you guess what’s coming next? Yes. Yes. Yes. There are financially good ways you could use your bonus.
B-I-N-G-O, you’re getting this now.
Bonus’s can be tough for people. It seems like yay, extra money! I earned it and I deserve it now.
Which is true, you did earn it, and you deserve to feel that way. (YAY). But when it comes to a bonus, you tend to get taxed hard. Like, more than your normal pay check gets taxed. So what can you do to avoid this?
Contribute to your RRSP because future you deserves it. A lot of companies will pay out their bonus’ straight to your RRSP if you elect for that to occur. This not only saves it from getting taxed this year, but also allows it to make the most bang for it’s buck . Literally. If your bonus if $3000 this year, and you put it into your RRSP – it can start the magical compound interest process to get you the maximum returns. This is probably one of the best, if not the best option for you. Do you know why? Because future you deserves to live comfortably when you’re living without your bi-weekly paycheck. Current you still earns regularly and can afford to miss out on money they weren’t 100% sure they were going to get, if you’ve budgeted properly! More on that later.
There are other great thing that you can do with your bonus, if you’re in a case of bad debt, would be to use that money to try and pay off that extra little portion that the bonus would give you. As you know, we always want to get ourselves out of debt as soon as possible, but this doesn’t avoid that your $3000 is more likely going to be around $1500 once it’s taxed. However, some is better than none, so if that’s what’s going to help you pay off your debt quicker – go for it!
Of course, the last thing you can do, that the majority of people probably do is led by the id. The want to have it now, be gratified now, and use it now on me. I suppose there is nothing wrong with this option, just that it reflects exactly the value of wanting vs needing. Material items, FOMO. Usually this option results in getting things you don’t need just because you have an influx of money for one month.
So you can decide, weigh the pros and cons of each option. Where can you see it paying off the most?
KB.