Did you get a holiday bonus from your employer? Or maybe you have a tax refund coming. If so, do you have any of it left, have you already got it spent in your mind, or are you thoughtfully considering how you can best utilize this surprise resource? Annual bonus payments and tax refunds are nice windfalls, which can be used to create more stability in your life. While it is fun to treat such income as “mad money” to be spent on frivolous endeavors, it may be more effective to use it to create more in the long run.
The Best Uses
Paying down a home mortgage is one of the best uses of extra cash. The less principal on which interest is calculated, the more money you will keep for yourself in the long run. Another benefit to making a principal payment is that if it brings the remaining principal to less than 80% of the appraised value of your home, then private mortgage insurance can be dropped, saving you even more money.
Contributing to a retirement account is another excellent use of extra money if your employer matches your contribution.
If not, consider the possibility of investing your bonus or tax refund into starting your own side business.
Other Good Uses
Home improvement needs are common for most homeowners. Keeping up the condition and value of your home are important long-term goals. Letting things go too long typically increases the ultimate cost of repairs. Dealing with them early can pay dividends.
Another good use of bonus funds is to invest in an estate plan if you don’t have one already. Over 50% of Americans between ages 55 and 64 don’t have a will. And 69% of parents have never named legal guardians for their kids. Of the 31% who have, most have made one of 6 common mistakes which means their kids are at risk. Are you part of this group?
Have you made one of these 6 common mistakes?
- Named a couple to act as guardians and you haven’t said what should happen if the couple broke up or one of the partners in the couple died.
- Only named one possible guardian. What if something happens to your first choice?
- Considered financial resources when deciding who should raise your children. Your guardians do not have to (and often should not) be financial decision-makers for your kids.
- Only have a Will, which means the Court will distribute your money, it’s totally public and doesn’t protect your money if your kids ever face divorce or a lawsuit.
- Did not exclude anyone who might challenge your guardian decisions or who you know you’d never want to care for your kids.
- Only named guardians for the long-term and did not make any arrangements for the short term if you were in an accident. What would happen in those immediate hours until your permanent guardians could arrive?
Dying without a will, let alone a comprehensive estate plan and Kids Protection Plan® for your kids create complications for your heirs and can leave your family in Court and/or conflict. While you may not relish the idea of investing your bonus or tax refund in an estate plan, the cost to you now would be much less than the cost to your loved one later.
If you would love to use your tax refund or holiday bonus to do the right thing for your family, contact us by clicking here to schedule a 15-minute call with our Client Services Coordinator. She will answer your questions and help to set up your Family Wealth Planning Session.