The year is coming to a close – which, for some, means holiday bonus season. If you’re lucky enough to be receiving an end-of-year bonus from your employer, you might be looking for some tips on how to make the most of it. Here are some humble holiday bonus suggestions.
Fill up your emergency fund:
Often overlooked, emergency savings funds are a vital part of any successful financial plan. Unexpected home repairs, a car accident, a hospital stay, visiting a sick relative, these are the unforeseeable and unpleasant – but necessary – expenses of life. Don’t let your finances be derailed by an unwelcome surprise; save for the unexpected and keep your financial future safe. As a rule of thumb, emergency savings funds should contain approximately 3-6 months of living expenses.
Maximize your retirement savings:
Do something nice for yourself this holiday season – like maxing out your IRA contribution. You have until Tuesday, April 18th – 2017’s tax day – to maximize your contributions to your Roth or traditional IRA. The logic is simple, but often overlooked: The more capital in your accounts, the more interest you can gain. Therefore, the most likely way to meet your retirement savings goals is to maximize the amount you save for retirement. 2016 IRA contribution limits – for both Roth and traditional IRAs – is $5,500. Individuals who are age 50 or over at the end of the calendar year can contribute up to $6,500.
Put money away for your children’s education:
Sure, it’s not a present under the tree. And, no, you probably shouldn’t wrap it. But if you put aside money for college while your children are young, they’ll be thanking you – and the power of compound interest – when they start college. There are three federally tax-advantaged ways to save for education costs: Coverdell Education Savings Accounts, 529 plans and UGMA/UTMA accounts. Contact a Waddell & Reed financial advisor for help deciding which plan best suits your needs.
Have a little fun:
We know you’re no Scrooge! Here’s hoping your holidays are merry and bright!
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