How Would You Spend a Raise or Bonus?
By Kim Lankford, Monster Contributing Writer
5. “I would put it towards my daughter’s education.”
A raise or bonus can provide extra cash to put toward college savings without having to cut back on your own retirement fund. The easiest way to save for college is by opening a 529 plan, which provides tax-free money for college. You can use the money for any US college, no matter which state’s plan you use, and can deduct your contributions from state income taxes in about half the states. For information about all the plans, see Savingforcollege.com.
6. “I would spend the money on a down payment on a new home.”
Making a 20 percent down payment when you buy a house can help you avoid private mortgage insurance, which can cost 0.5 percent to 1 percent of the loan value every year, meaning up to $3,000 per year on a $300,000 loan. The bigger down payment also helps lower your monthly payments, giving you more flexibility if you end up losing your job or want to cut back on your work hours. And you’ll be less likely to have to cough up extra money if you sell in a down market.
Several readers also recommended using the extra money for home improvements, which can be a good way to add value to your home without taking on extra debt.
7. “I would spend the money on vacation!”
Of course, you can have some fun with the money too. But making some smart moves first can free up more cash for everything else — and give you even more money for a splurge.