Other than folks who receive an annual bonus this is the only time of year when some people will receive a lump sum of money. Instead of squandering your money consider the following options:
- Add to your IRA: you can contribute up to $5,500/year to a traditional and/or Roth IRA or $6,500 if you are 50 or older by the end of 2014
- Pay off debt: If you are carrying more debt than you are comfortable with, consider paying it down. It’s like investing at the same interest rate being charged on the loan. Try to pay off your credit cards with the highest interest rate first.
- Top off your emergency fund: You should have 6 months salary liquid in case of an emergency. Keep the money in an interest earning account.
- Boost retirement savings: If you aren’t contributing enough to a company retirement plan to capture 100% of the company match, you are walking away from free money! Use the extra cash to increase your contribution.
- Keep the money in a side fund for college: Putting the money in a 529 plan decreases what your student can qualify for in endowment “Free money”.
- Prepay your summer vacation: Use some of the cash to pay off your vacation in advance so you don’t have to take it from your income in the summer.
Do yourself a favor by choosing one of these options instead of wondering where all the money went at this time next year! Contact Rob today for a free consultation on this and other concerns you have here.