When people receive their end-of-year bonus, one of the most common questions they ask is how to use that extra income. It can be exciting to see this additional money, but it is crucial to consider your needs versus your wants. While you may be eager to indulge your wants, it’s vital to prioritize your needs first, such as paying off any outstanding debts or bills and investing to make your money work for you. Groundbreaking Real Estate is here to remind you that proper financial and retirement planning starts with setting specific goals. So, let’s work together to make the best use of your bonus and ensure a secure financial future.
How to Invest Your Bonus Paycheck
Did you receive an end-of-year bonus? Wondering how to use it wisely? We’ve laid out some basic guidelines to help you make the most of your extra cash. If you’re interested in planning a sound financial future, let’s chat about your investment strategy. Interested in diversifying into real estate rather than relying on your 401K for retirement? We can help you find real estate investments that are a good fit for you.
Reach out to us today to start your journey!
Step 1: Pay Off High-Interest Debt
If possible, it is in your best interest to make sure that your higher-interest loans (e.g., +7% annual rate) are paid off more quickly. With interest rates as high as they are, paying off your outstanding balances now can save you a significant amount of money in the future. If you are starting to pay off your debt, consider these 2 methods to pay off your debt.
- Snowball Method: paying off the smallest of all your loans as quickly as possible. Once you pay off that debt, you take the money you used for that payment and apply it to the next-smallest debt owed.
- Avalanche Method (Recommended): focuses on paying the loan with the highest interest rate loans first. Start by repaying the debt with the highest interest. Then, use that money to pay the debt with the next highest interest. Repeat this process until you have paid off all your debts.
Ideally, there should be a portion of every paycheck that goes towards paying off your debt. However, an extra influx of cash presents a golden opportunity to pay off your debt. Think first: remember that low-interest rate loans (e.g., home mortgages) are not necessarily bad debt. Determine whether you could earn more than your interest by investing that amount rather than paying down your debt. Additionally, there are tax benefits to home mortgage interest payments, which reduces your effective rate further.
Step 2: Secure Your Emergency Fund
It’s highly recommended to have a reserve of cash that equals about three months of your expenses. This will vary from person to person depending on your age, job security, and health. If your emergency fund is below this recommended amount, it is a good idea to put some of your bonus into this fund. Find a way to make that emergency fund savings work for you while remaining relatively liquid such as using a high-yield savings account, or Certificate of Deposit. Once you have a comfortable amount of emergency funds, your end-of-year bonus can be used to build up your passive income investments.
Step 3: Invest and Consider Real Estate
Now, use any extra funds to invest to grow your future wealth! Building a real estate portfolio is a highly discussed passive income option. But let’s start by debunking a common misconception. Investing in real estate is not just for the wealthy. It’s a strategic way to increase your wealth over time. By investing in our real estate projects as a limited partner, you can make your money work for you, with minimal effort on your end. Our real estate projects provide an opportunity to become a part owner of a real estate asset, reap the profits as it grows, and enjoy the tax benefits while enhancing your financial stability in the process.
Are you interested in learning more about leveraging the potential of real estate investment opportunities? Groundbreaking Real Estate focuses on sharing valuable investment opportunities, helping you get the most out of your money, and working towards your financial goals. We aim to help you generate passive income streams. Since 2012, Groundbreaking Real Estate has successfully invested in real estate projects valued at approximately $275 million. Craig enjoys meeting with potential investors to discuss their goals and investment strategy, to determine whether investing in real estate is right for them. He is the ideal partner for anyone looking to make profitable real estate investments. We are excited to have you join us on this journey!