2013 is officially in full swing! While most of us are busy trying to lose the few extra pounds we packed on over the holidays – as well as figure out a way to pay off all those gifts our loved ones have likely already forgotten about (sorry, it’s probably true!) – some of us started the new year with a raise or a bonus. If you’re one of those people, congratulations! It’s wonderful to have your hard work recognized and rewarded.
But before you give in to the siren song of a new car or a bigger apartment, consider one of these ideas for your new, bigger paycheck or sudden windfall:
Start an emergency fund
Unexpected financial events pop up all the time – a flat tire, a big medical bill, a broken air conditioning unit. You’ll sleep better at night knowing you have a cushion to fall back on.
When you’re trying to grow your nest egg, there’s nothing more valuable than time. If you invest your bonus in a good growth mutual fund today, you’ll see it grow by leaps and bounds in no time.
Increase your retirement contributions
A good rule of thumb is to increase your retirement contributions a few percentage points every time you get a raise; if your company matches your contributions, consider dialing up your savings even more to get the full match. No sense passing up free money!
Start a college fund
It’s never too early to start thinking about your child’s future, particularly because college costs are rising much faster than inflation. There are lots of different options for saving for a college education, so do your research and put that raise to work!
Pay off your credit card
Credit card debt is the worst kind of debt because the APRs are usually sky high. Use your raise or bonus to ramp up your debt repayment or just kill the balance completely – you could end up saving yourself thousands of dollars in interest and fees.
Buy life insurance
The new year is a good time to reevaluate your insurance coverage and decide if you have enough. If you don’t have life insurance and you have dependents, now is a good time to do some comparison shopping on term policies.
If you think your finances are on track but don’t want to blow your extra money on something frivolous, you might want to donate it to a cause you believe in. Besides providing help to a worthy organization, donating to charity has a lot of positive psychological benefits. We feel good when we give, and who doesn’t want to feel good, right?
A new Mercedes in your driveway will make you happy today, but using your extra cash for one of the purposes outlined above will keep you happy well into the future. Trust me, your future self with thank you!
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