2022 is almost the end, and your company may reward you for your hard work and commitment to the company with an end-year bonus. However, you may waste the bonus on many unnecessary things. For example, you might spend money on technology devices you do not need. Or, you may want to spend all your money on a shopping spree or a foreign vacation.
However, you might save it for a brighter future rather than spending the end-of-year bonus on needs. Let’s look at eight smart ways to spend your year-end bonus.
1. Pay off Your Debts
If you have outstanding debts, such as personal loans, ensure you pay them off first. Reduce your monthly expenses and boost your ability to invest by reducing expensive short-term liabilities such as credit cards, student debt, overdrafts, and consumer expenditures. It also puts you in a better position if you face financial difficulties in the future.
2. Create an Emergency Fund
Emergencies are part of reality, such as job loss, unanticipated house repairs, etc. You must have an emergency fund to handle uncertainties without taking out a loan. If you don’t already have one, make one right away.
If you currently have an emergency fund, ensure it is sufficient to cover 6 to 12 months of spending. If not, use the extra money you now have to contribute to the fund. You should also make sure that the finances are readily available. Keeping a portion of the fund in a bank account is one way to ensure that it is quickly accessible when needed.
3. Move Your Money to High-Yield Savings Account
The longer you save your money in your checking account, the easier it is to spend it without a thought. Your first step should be to transfer any windfall funds out of your current account, whether a bonus, an inheritance, or a sizable birthday gift. Avoid leaving the reserve, where it is visible and alluring. Instead, quickly open a halal savings account online and consider transferring your bonus there.
4. Invest in Index Funds
After you have created an emergency fund and paid off your debt, investing in index funds can be a good idea. For individuals with limited stock market experience, investing in diversified halal stocks of the S&P 500 is a great choice. Investing in an index fund can receive an index’s return, which historically has averaged 10% yearly over decades, and effectively own a portion of the overall stock, market or a passable imitation of it.
Additionally, you can avoid analyzing individual stocks by investing in an index fund. You purchase the index, hold it through good and bad times, and hopefully add more over time. So, your end-year bonus can be another step to boosting your portfolio.
5. Treat Yourself
Bonus is a wonderful thing. After you’ve made steps to ensure your long-term financial situation, why not reward yourself with a tiny percentage of your bonus?
You may buy a vacation to rest and refresh before the next bonus round! You may get a new work wardrobe. You may also use your bonus to pay a down payment on a house. You’ve earned the right to reward yourself wisely, so enjoy it.
6. Make Sadaqah
According to studies, people who gave their annual bonuses to charities and donations were happier than those who kept them for themselves.
“Indeed, the men who practice charity and the women who practice charity and [they who] have loaned Allah a goodly loan – it will be multiplied for them, and they will have a noble reward.” (Al Hadeed 57:18)
7. Invest in Yourself
Investing in yourself is another smart way of using your bonuses. Utilize credits or subsidies from different resources to expand your area of expertise or acquire new skills. Investing in yourself is not only about upskilling your knowledge, but you can also invest in your confidence by Investing in a high-quality suit or dress that is acceptable for your workplace and boost your confidence in 2023.
Year-end bonuses frequently cause us to disregard the financial goals we set at the beginning of the year. There is nothing wrong with rewarding ourselves as a form of appreciation for our hard work. However, keep in mind that although you are free to use your year-end bonus, you don’t want to waste it on frivolous spending when you still have financial goals to meet. Instead of spending your bonus, save it to help you reach your financial goals.
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