Smart ways to use your bonus

If you receive a bonus check from your employer this year, it’s important to take a look at your overall financial picture to make sure you’re taking the best advantage of that extra cash:

1. Pay down debt.
   If you have high-interest, non-mortgage debt such as a car payment, student loan or credit card debt, this is a great place to apply your bonus — potentially saving thousands of dollars in interest long term.
   
   The average U.S. household owes more than $8,000 in credit card debt, with the average interest rate over 17 percent on unpaid balances. Using these example amounts, paying only the minimum balance each month could cost you close to an additional $7,000 in interest and take you more than 18 years to pay off — almost doubling the cost of the initial debt. So pay off that high-interest debt first and your future self will thank you. 
    
2. Pad your emergency fund.
   If your car won’t start, your furnace breaks down in the middle of a cold snap or you lose your job, an emergency fund can cover your expenses without forcing you to accrue debt. Your emergency fund should be held in an easily accessible bank account, but don’t use your primary checking account for this purpose. Keep this fund in a separate account so you’ll be less tempted to dip into it for non-emergency purposes.
   
   Experts recommend that an emergency fund should contain anywhere from three to 12 months of household expenses. But if you don’t have that much saved, you’re not alone. In fact, four in 10 U.S. adults say they don’t have enough saved to cover an emergency expense of even $400 and would have to borrow the money or sell something to cover it.
   
   If you don’t have an emergency fund, using part or all of your bonus to open one is a great place to start.
    
3. Give back.
   Whether you choose to seed a college fund for your kids or grandkids or donate to a favorite charity, research shows that spending bonus money on others may bring you more happiness than spending it on yourself. Even if you use the bulk of your bonus to pay down debt or start an emergency fund, consider giving a portion of it — say five or 10 percent — to others.
    
4. Make progress toward financial goals.
   If don’t have any high-interest debt, have an emergency fund, and were able to give some of your money away, first take a moment to pat yourself on the back. Your financial future is off to a great start. Now may be the time to work with a financial professional to figure some financial next steps.
   
   Depending on your circumstances, your financial professional may suggest saving for your retirement through your 401(k), IRA, or an annuity; contributing to your college savings plan; or saving up for that bucket list vacation — whatever steps you need to take toward achieving your financial goals.

This information is brought to you by Athene — where unconventional thinking brings innovative annuity solutions to help make your retirement dreams a reality.