Investing Your Year-End Bonus

Here's a piece from Yahoo on how to best invest your year-end bonus (or any extra money you might be gifted, get from a tax return, etc.).

I'll skip the blah, blah, blah filler part of the piece and cut straight to the recommendations:

• Pay Down Debt
• Maximize Your Match
• Use the Money to Rebalance
• Feed Your Tax-Sheltered Accounts

It's hard to argue with these. They are good, solid recommendations.

I received a bonus this year and gave it away as part of pledges I made to two charities. I'll see part of it come back to me in reduced income taxes this year.

Comments

[Seattle]

I'm a bit confused about the 401k issue you mention. My employer matches 50 cents on every dollar up to 6%. I contribute the maximum each year to my 401k, and this year I anticipate getting a large bonus in February. Why would it matter if I spread my contributions throughout the year versus loading up in February when I have a large payout? Could you share a math example?

[Seattle]

Please disregard my previous comment. I worked out the numbers in a spreadsheet and I see how that works. That is an excellent point - something I've never considered in the past. I will definitely spread my 401k contributions out throughout the year to maximize the employer match. Thanks for sharing the tip!