Thereâs nothing quite like the joy of receiving a bonus at work. Whether itâs part of your compensation or a christmas surprise from your company, a bonus feels like an extra pay day at the best possible time.
But what should you do with that bonus? Letâs agree that spending it all is not the best option. Letâs maybe also agree that sticking it all into savings is no fun either. So how much should you spend, how much should you save, and how should you save it?
We have three different suggestions for you, based on your personality. Each one has its advantages but every one of them has a good mix of fun and responsibility.
This one is for those of you who want to live large. Youâve either met your savings goal, or you just like being a little reckless. Either way, itâs time to splurge.
Hereâs how youâll break down your bonus:60% you can spendâ
20% goes into savings or ETFsâ
20% gets invested into stocksâ
The biggest part of your bonus will be going on something fun. Itâs a good idea to pick your big purchases out ahead of time, but with this much money at your disposal, you can also just go wild.
The rest will be divided equally between savings and investments. Build up your rainy-day fund a little, or invest into a low-risk ETF like the S&P 500 or Dow Jones Industrial Index. Since youâre living for today, another 20% can go into your favorite stocks. This move carries more risk, but can also give you a bigger return, and since youâre not worried about your savings, a little risk is fine for you.
You want to spend a little, but youâre also keen on building up your savings. You want to help your savings goal along, or get a head start on it. Youâre not risk-averse, but you also donât want to lose 20% on your investments in a month.
Hereâs how youâll break down your bonus: 40% you can spend â
30% goes into savings â
15% goes into an ETF â
15% goes into stocks â
This breakdown allows you to still spend nicely. Almost half your bonus can, depending on how big your bonus is, still mean a big-ticket purchase.
Your savings are next. This is a separate Pocket that you donât touch, and keep as a fund for a rainy day.
Youâll divide whatâs left over between an ETF and stocks. If you want to avoid risk, you can invest in a large company thatâs known for predictable dividends and lower volatility. If you want to chance it a little, you can invest in a smaller company you think is going to make it big. Either way, youâre not risking too much of your money. â
â
â
You donât want to spend at all. Or maybe just one nice dinner. But most of all, youâre keen on building up those savings. Risk is a board game you play, not something you tolerate for your investments.
Hereâs how youâll break your bonus down:
â
20% you can spend
40% you put into savings
40% you invest into an ETF
â
This method means you hold on to 80% of your money. Half of that will sit idle in savings, ready if you need it in an emergency. The other half youâll invest in a large ETF, a comparatively safer bet compared to investing in a stock. Youâll have the chance to grow it a little, but most importantly youâre holding on to most of it.