Each year, people all over the country receive an end-of-year-bonus around the holidays as a reward for all of their hard work. And many tend to manage this sudden windfall in very different ways, from splurging on new wardrobes to paying off debt.
At Student Loan Hero (SLH), we also receive an end-of-year bonus, and some of our employees used their money in very creative ways. Here’s a look at five different ways SLH staff members treated their extra cash.
1. Boost your investments
Martin Hamedani, our director of business development, knew exactly what he was going to do with his bonus — he planned on investing it.
He put the money into a brokerage account and immediately felt great about his choice. Essentially, he felt secure in the knowledge that he would have more capital to buy with the power of dollar cost of averaging.
By contrast, community outreach specialist Jaclyn Lambert was a lot more skeptical. She and Hamedani had talked about investing, and Lambert realized she had too much money sitting in her savings account.
“I already have an IRA and a 401K, and I just started hoarding too much money into savings,” recalls Lambert. “I needed to make my money work for me.”
While she regrets not going on a big vacation, Lambert reminds herself that investing now is better for her financial security in the long-run.
2. Make extra credit card payments
Debt repayment was a big focus for many Student Loan Hero employees.
Frankie Rendon, community outreach specialist, and his wife love to travel. When he got his end-of-year bonus, he immediately checked out travel sites for great deals.
But with a baby on the way, Rendon gave himself a reality check and decided to use his bonus to pay down debt instead.
“The smart decision was to make sure I was in the best financial position to raise this child,” Rendon explains. “So I paid off two credit cards that had been adding up over the past few months.”
“I had a little left over after paying them off, so I put the rest in our baby fund,” adds Rendon.
Casey Bond, managing editor, was initially tempted to blow her end-of-year bonus on a shopping spree. However, she ultimately decided to pay off a credit card instead.
While she says she wishes she could have destroyed the handbag department at Nordstrom Rack, she feels good about her decision to go a more responsible route.
“I do get a thrill out of paying off debt or putting a big chunk of money into savings–which I understand is a little weird,” says Bond.
3. Tackle your student loan repayments
True to Student Loan Hero form, several employees used their bonuses to accelerate their student loan repayment.
Marketing manager David Kelly decided to use his end-of-year bonus to increase his student loan payments. And thanks to this windfall, he will now pay off his loans 18 months sooner. That will save him more money in interest with a shortened repayment term.
The bonus ultimately gets him one step closer to getting rid of his debt, which he plans to eliminate within the next year. As an added perk, he also set aside some of his bonus to buy a new surfboard.
Digital editor Alicia Hahn considered putting her bonus right into savings. However, she decided to put her money towards her student loan debt, too.
“A big portion of my income already goes to my loans, so I was sad to put my bonus towards them too, but I will save nearly $500 in interest by doing so,” says Hahn. “It’s a bummer now, but worth it in the end!”
4. Pay down debt, donations, and savings
Both Jeffrey Trull, content director, and Trevor Ford, our marketing data analyst, went for a hybrid approach. They proceeded with allocating percentages of their bonuses towards debt, savings, and charity.
Although Ford considered using his end-of-year bonus to stay at an underwater hotel or arrange a celebrity meet-and-greet, he finally decided to put it towards student loans, savings, and charitable donations.
“It was depressing to realize how much I’m paying in interest over the course of my student loans,” Ford says. “But I tried to look at it by repayment length. By making this one payment, I’m cutting four months off of my repayment term.”
Trull set aside money to put towards a car loan, holiday expenses, and donations. But he put about half of his bonus towards setting up a side business, too.
“I feel really glad I planned it all out and put it in my budget the way I did,” Trull explains. “I know in the past, I’ve simply taken a bonus and just squandered it away on I don’t even know what.
“It feels nice to actually think about my priorities and spend the money based on what really matters to me and the areas that need it most,” adds Trull.
5. Increase your overall savings
Elyssa Kirkham, content writer, just closed on a house. So she considered using her bonus for closing costs or to furnish her new home.
Instead, Kirkham ultimately decided to use the money to bulk up her emergency fund. She had dipped into it to make the down payment, so the bonus helped replenish it. Now, she’s working on building it back to cover six months’ worth of expenses.
“There are a lot of new purchases I’d like to make for my home, from a loveseat to a new bed frame,” Kirkham says. “But I’m going to buy as I can afford to instead of draining my bank account or going into debt. My financial safety net is important to me.”
Manage your windfall wisely
When you get a sudden windfall, it can be tempting to just blow it all on something you want but necessarily don’t need.
However, if you spend it wisely, you can stretch your bonus further by applying it towards your financial goals. Whether you decide to pay down debt, save it, or invest it, your money will work harder for you and reap you larger returns over time.
To find out how much you can save in interest by applying your windfall to your student loans, check out our prepayment calculator below.
Want to get started investing?Here are the top investing options for 2018!
|0.5%||$0||Visit Future Advisor|
|0.15% - 0.35%||$0||Visit Betterment|
|0.49% - 0.89%||$25,000||Visit Personal Capital|