Money / Financial Planning
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According to the Census Bureau, the median income for all workers was $41,535 in 2020. That was lower than the same figure from 2019 of $42,065, likely in part due to the pandemic. For those who receive near the median at their jobs, receiving a raise or bonus can be a nice boost for their finances.
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But that money can disappear quickly if you don’t manage it properly. While it is all too easy to let yourself fall victim to lifestyle inflation along with the inflation that’s impacting the economy, making a few savvy moves will allow your money to grow rather than disappearing. Here, we outline a seven ways to make that happen.
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1. Determine Your Goals
If you get a bonus or a raise, the first thing to do is determine your goals. Once you understand that, you can make the right moves with your influx of cash. “If your goal is to get out of debt, then that is a good place to put the bonus,” says Jay Zigmont, CFP and founder at Live, Learn, Plan. “If on the other hand you have paid off your debt and are working towards retirement, then that is where your bonus should go,” says Zigmont.
He further notes that the key is to be sure not to see your raise or bonus as “found money” you can spend frivolously. Unless you have already met your financial goals, there are probably several better uses for your money.
2. Prioritize High-Interest Debt
Depending on how much money you currently earn and whether you get a bonus or a raise, there are some types of high-interest debt you might consider. For example, if you receive a bonus of a few thousand dollars, you can put it toward paying off credit cards.
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If you have student loans, the balance on them might be more than what you have in credit card debt. Hence, if you get a raise, you could focus on paying more of your student loan balance. While student loan interest rates are not as high as they are for credit cards, the high balances could mean a lot of money goes toward interest …….