Use your Christmas bonus wisely this year
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Many companies offer year-end bonuses to employees, and if you usually run out and spend it on last-minute shopping, you may want to rethink that splurge mentality – particularly if you have a lot of debt accrued. Christmas gifts that seem so important to purchase often fade into obscurity not long after the bows and wrapping are torn away. Why not use your year-end bonus to make a real difference in your life instead? Here are five smart ways to use your bonus.
#1 Pay off your car loan (or refinance)
If you are close to having your car paid off, why not take the bonus and apply it to that debt so that you have one less bill each month? Plus, once your car is paid off, you can change your insurance coverage from comprehensive to liability that can further decrease your monthly bills. If you have a high-interest car loan that’s not close to being paid off, you may be able to use your bonus as a down-payment on a lower interest refinance loan to drop your monthly payment.
#2 Catch up on bills
If you’re past due on your bills, using your bonus to get caught up makes sense – that way you’ll go into the New Year with a clean slate and no fear of debt collectors calling on overdue bills. You should prioritize by importance to you, not by the loudest debt collector. For instance, if you are one month behind on your utilities so that you’re facing shut off each month, clear those up instead of a credit card bill. You can’t do without heat or light – the credit card bills can wait.
#3 Max out your 401(k)
If your bills are current, you may want to put the money into your 401(k). Before your bonus check is issued, if you’re not maxed out on your 401(k) contribution for the year, you can talk to the payroll office and tell them you want to bump your 401(k) contribution to 100% of the pay for that check. They can issue your regular paycheck as normal then absorb the bonus into your 401(k). This is smart for a couple of reasons – first there will be no income taxes withheld from the bonus so it will all go into your retirement account. Second, if you have an employer match, you will get more into the account than just the bonus. That’s a double win.
#4 Pay off high-interest debt first
If your monthly utility bills are caught up and you’re maxed out on your 401(k), putting the cash towards your highest interest credit card debt makes sense. Carrying month to month balances on credit cards is like taking a high-interest loan each month. It’s not a good money habit. If you can use your bonus to take a bite out of your credit card debt, your finances will be much better off. And once you pay down a card, don’t run it back up. Stick it in your safe or under your socks so it’s not in your wallet to be used!
#5 Use it to file bankruptcy
If you’re deep in debt, living paycheck to paycheck, and fending off debt collection calls because you’re behind on everything, that’s no way to live. Chapter 7 bankruptcy can put an end to unsecured debt including credit card and medical bills plus older tax debts. Chapter 13 bankruptcy can give you time to catch up on your mortgage or car note while also shedding a good bit of your unsecured debt. If you are in dire financial straits, using your bonus to pay for a North Carolina bankruptcy may be the best gift you can give yourself – because it offers peace of mind.
For a free North Carolina bankruptcy consultation, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 today for a free consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.