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What to do with a bonus?

By Louise Chan · December 18 2019
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egg

Earn

What to do with a bonus?

By Louise Chan
December 18 2019
Reading:
egg
What to do with a bonus

What to do with a bonus?

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By Louise Chan · December 18 2019
Reading:
egg
What to do with a bonus

A bonus is a one-off additional compensation on top of ordinary time earnings (OTE) that employers may give employees to recognise good performance or simply for the year-end holidays.

Some people choose to treat themselves and their loved one with their bonus money. While there’s no problem with spending your extra money on yourself, you may want to consider spending it wisely.

Here are some things you may consider doing with your bonus money.

Debt payments
If you have a high-interest consumer debt or credit card debt balance, consider paying it off to prevent the debt from ballooning. You may also make an additional mortgage payment to reduce your balance without getting penalised.

Many financial experts agree that it’s more important to decrease or pay off debts before considering investing.

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Save a portion of the money
Consider saving a portion of your bonus in a high-interest savings account or a certificate of deposit (CD). 

CDs or term deposits (TD) are savings accounts that require you to lock in your money for a specified period in order to access higher interest rates. These products are virtually risk-free as long as you hold the account to maturity.

Invest a portion of the money
Invest in low-cost short-term mutual, index or exchange traded funds (ETF).

This is recommended if you are interested in investing but lack time or knowledge to keep track of your investment portfolio. This way, your extra money is working to generate more money for your nest egg.

Top up your super through salary sacrifice
Don’t be satisfied with the 9.5 per cent employer guaranteed contributions because it may take longer for your portfolio to grow your retirement fund.

Consider maxing out the annual contributions cap of $30,000 concessional and/or $100,000 non-concessional contributions or simply topping up your super.

Even a few hundred dollars can go a long way after a few decades with the help of compound interest.

Invest in yourself
Consider investing in your financial literacy because the knowledge and good financial habits you develop can be used over the course of your life.

You may attend paid seminars and programs designed to boost your professional skills, get ahead of the competition and potentially increase your income.

Save some for tax
If you have a side hustle or freelancing gig, you may be liable to pay extra tax for the income you generate.

Consider setting aside a portion of your money to pay or supplement your tax due come tax season.

What to do with a bonus?
What to do with a bonus
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About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

Join The Nest Egg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

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