So I was offered a position that comes with a bonus, and this is the first time I’ve had this type of salary structure. I was wondering how the rest of you guys budget for a large chunk of money to all of a sudden come in. Do you blow it? Save it? Pay down debt? Or do you slowly allocate it to the next year’s spending? I’m trying to be budget conscious and have a huge amount of student loans, so I was thinking that I would use most of my bonus at the end of the year and just pay off a large chunk of it. I figure with this approach I can wittle it away a lot faster. Any thoughts on this?
Blow it on strippers bro. Make it rain. Don’t worry about those student loans, they can always be paid back. The government is blowing money so should you.
In all seriousness, paying off student loans is a good idea as they cannot be discharged in bankruptcy. Maybe put a little money for emergency purposes, maybe you can fund your IRA before April 15. What is the interest rate on your student loans?
I get a Venti that day instead of a Tall.
Weighted avg. on student loans would prob. be ~ 6.5% Sometimes I wonder if it’s even worth paying them off quickly or just live with them, as they’d most likely be the cheapest debt to service. At this rate, making the min. payments gets me past the 25yr forgiveness schedule. But I really don’t want to be 40 and paying off student loans. So it’s either seriously lower my standard of living/savings and buck up monthly payments or give all my bonuses for the next few years. I don’t have any significant credit card debt, btw.
just wondering but how much student loans do you have? just for undergrad? 6.5% is a pretty high rate in today market. I would probably pay some off and maybe try to refinance if possible.
Have about $100K - mostly from grad school, which have less generous rates, plus some private lenders. It’s mostly Federal, though, so maybe I’d just pay off the private guys first. My first 1.5 years out of school I’ve been working in the nonprofit sector and haven’t made enough to cover the min. payments so I’ve been on the income-based plan, which just means that interest has been compounding for that time. Thank goodness I’m looking at a higher salary soon.
Yiddish proverbs say when you get a windfall, save 1/3, invest 1/3 in your business activities (which might be investing in this case), and spend 1/3 on yourself (and family, and friends). Unless you have specific pressing needs that make it obvious that you need to allocate to something different, that turns out to be a pretty good rule of thumb for any windfall (bonus, inheritance, etc.). The savings portion might be allocated differently depending on your circumstances. You would, in order of priority: 1) pay down debt, 2) build an emergency cash fund, 3) start to invest savings for longer growth, once the emergency fund is full enough. Whatever you do, DON’T get used to a lifestyle that depends on a bonus that you might not receive. Live on your base, grow and invest on your bonus.
i would pay down that student loan. how did you transition to investment management if you dont mind me asking? personally i save my bonuses for vaca, but then again my bonus is nothing
Pay off all of the CC and then put the remainder to the Student Loan.
Paying off debt seems like a good first step.
Great advise all around. Thanks alot guys - I’m definitely going to go the way of paying off te student debt and get that monkey off my back. I think it’s also good that I’m not used to windfalls, so it’s not like I’ll miss it. For BPBB - I took some MBA classes in grad school and my concentration is in Finance. However I’m more interested in the developmental nature of investments and will be working in that respect which includes a social context. Edit: also passed L1 last June, which, along with my experience definitely helped in landing a gig
def pay off as much short-term debt as you can (CC, car loan, etc.). invest the rest. get the wife something is she knows how much you got.
oh, and if there’s anything left get some grilllllllllz
You may not want to pay off low-interest rate debt, unless you are confident that you can get it if you need it later. Also, things that improve your human capital are investments that are likely to pay off over time. Obviously be realistic about what your prospects are with and without the investment, but if you can borrow cheap and invest in your human capital, that’s usually a good deal that people underestimate while they are younger.
Buy yourself something each bonus so you at least have some physical enjoyment from it. Pay off your debt highest interest rate to lowest. If you have debt less than 5%, you might as well invest rather than pay down and set that as your personal WACC. You should be able to do better and there isn’t a huge opp cost if you dont beat it. With bonuses, you will eventually get to the stage where you have no more debt and it should go into saving & investments. That’s when you start getting wealthy.
the great kenny powers once said: “A humongous part about being a celebrity is cashing in on it, making $#!& loads of money, having expensive luxurious things. That way, in case one day you’re not famous, you can still be rich as hell and better than everyone around you.” and i think his words are as valid now as the day they were written
bchadwick Wrote: ------------------------------------------------------- > Yiddish proverbs say when you get a windfall, save > 1/3, invest 1/3 in your business activities (which > might be investing in this case), and spend 1/3 on > yourself (and family, and friends). > > Whatever you do, DON’T get used to a lifestyle > that depends on a bonus that you might not > receive. Live on your base, grow and invest on > your bonus. +1. Basically I agree with all of what Chadwick said - it doesn’t have to be 1/3rd each category, but you should save some, spend some, and invest some (hopefully save/invest more than you spend, though). As for myself, I’m pretty aggressive towards saving…when my bonus hits, I’m usually not ‘relying’ on it for anything. This yr whatever I get will very likely be a good chunk of a down payment for a house, hopefully in the next 24 months. Retirement and my emergency fund are both pretty well funded. I’ll take a vacation or something with the g/f for the spending portion.
I ask for 10% of my bonus to be paid in $1 bills.