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9 wise money moves to make with your bonus

Congratulations on your bonus! Here are 9 smart ways to put the funds to good use.

By MSN Money Partner Jun 20, 2014 12:12PM

This post comes from Allison Martin at partner site Money Talks News.

Money Talks News on MSN MoneyExcitement is running rampant through your veins. You feel like a kid on Christmas morning because you just learned that you’ll be receiving a bonus from your employer for all of your hard work.

Woman counting money © Jose Luis Pelaez Inc, Blend Images, Getty ImagesAnd without a doubt, the first word that comes to your mind is "splurge."

Although you may feel entitled to use the funds however you please, there are some wise moves you can make to alleviate financial burdens, right now or later on down the road.

But there is one thing you must do immediately: Make a plan and execute it promptly so the funds don't grow legs overnight and run away. In other words, the longer that money sits, the more tempted you may be to waste it all on meaningless purchases.

Here are some suggestions for putting that bonus to good use:

1. Tackle credit card debt

It may not be possible to completely eradicate what you owe, but paying the balances down can save you money that is otherwise flushed down the toilet each month on interest payments.

The debt snowball method, which suggests that you tackle the smallest balance first to build momentum, is recommended by some, but it makes better financial sense to tackle the card with the highest interest rate first.

Here are a few additional tips to help you quickly eradicate those credit card balances.

2. Boost your emergency fund

You can also use the extra funds to beef up your savings account so that a new set of tires, a layoff, a medical emergency or other unexpected event or expense doesn't immediately turn into a financial nightmare.

And it wouldn't hurt to shop around at other financial institutions for savings accounts that offer a greater return on your money.

3. Establish a college fund

Planning to incur higher education expenses for yourself or your children in the future? Why not start preparing ahead of time with a college fund? A 529 plan is worth considering because it allows you make tax-free withdrawals, as long as they fit the bill for a qualifying expense.

But before making the leap, speak with a financial adviser to determine if other plans, such as the Coverdell education savings account, better suit your needs.

4. Beef up your nest egg

Have you maxed out contributions to your 401k? If not, this may be the perfect opportunity. You don’t want to miss out on free money in the form of matching contributions from your employer or the tax breaks derived from pretax deductions of the money you save in it. And you don't want to retire poor.

Another benefit of beefing up your nest egg is the beauty of compounding interest. It tends to favor those who make smart investments early on.

5. Get caught up on past-due bills

Have you been hit with a slew of late fees and interest penalties on a delinquent account? If so, that obligation should be at the top of your priority list. Overdue bills are costing you money and likely wreaking havoc with your credit scores.

6. Be charitable

If you're in the giving mood, donating funds to a good cause will warm your heart and could reduce your tax liability. To determine which contributions are tax-deductible, refer to IRS Publication 526 (.pdf file) or use the online eligibility tool.

7. Invest!

Now, before you dive head first into the world of securities or any other form of unfamiliar investment, speak with a fee-only financial adviser for guidance. The last thing you want to do is fall for some inflated promise you saw on a late-night infomercial.

Here are some tips from Money Talks News finance expert Stacy Johnson on how to locate and select a reputable financial adviser.

8. Make home improvements

How about that leaky faucet or ancient air conditioning unit that's causing your utility bill to spiral out of control? Use the funds to take care of those issues now before they end up costing you more in the long run.

9. Live a little

This suggestion may have caught you off guard. After all, life isn't about fun and games; most of us have to find a way to make a decent living for ourselves. But you must live a little on occasion to make the most of it.

So allocate a small percentage of your bonus to the slush fund and give yourself a proverbial pat on the back for all of your hard work and accomplishments.

Regardless of which route you take, move as swiftly as possible before temptation knocks at your door.

More from Money Talks News

Jun 23, 2014 7:38AM
Be Charitable? HELL NO!

The government already steals too much of my bonus that goes to charity for people and countries that don't deserve it.

Jun 23, 2014 8:52AM

Too much of my money goes to taxes.  I would be doing well if I could keep more of my own earnings and government were limited to just protecting our rights.

Jun 21, 2014 10:49PM
well the very 1st thing I do is make sure I go to a very rich neighborhood and am near the church and I make sure that my clothes look like they have been worn for a month without washing and I work in my yard before I go to that corner and I am sweaty and tired and make sure I have not shaved and I have my sign looking all wrinkled and scuffed up. then I go to work I have a water bottle with a piece of a news paper and ask if I can wash your windows and start washing them before you say yes or no then you are in your purse or wallets giving me your money. the light always changes before I am able to finish  and those who see me trying they are the biggest suckers of all they don't want me near them so they just toss the money on the ground without looking at me or saying anything. I am able to get more food stamps then  what I am able to use so I always sell them and I am always complaining to my case worker about the housing and she is putting me into a newer house every few years and the house cost more each time I move and I pay less and less the house sells for around 150,000 to 200,000 homes they are almost always run down after I leave I wish you slum lords would keep up with fixing the place. I am able to save about 90% of my extra food stamps I sell so my bank accounts has to be in my other names and ssi numbers oh thank you mr odumbo 
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