What to Do With Bonus Money

[Anonymous]

Greetings

I received a bonus this year and hit the next tier which would entitle me to $10,000 which will come out to $7,500 give or take after taxes. I’m undecided what to do with it but here is what I have going on:

$10,000 personal loan - Opened in August 2018; balance at $9,250. 14.4% interest on a 60 month term

Student Loans: $160k. I pay the monthly payment plus every dollar I make for my side job teaching college. I started this year and put in about $20k a year between both sources of income.

Credit Card Debt: $453.25 out of $30k limit. I PIF every month

Auto Lease: $451.67 a month opened December 2017 on a three year term

Savings: $3,500. Due to a cancelled wedding, medical expenses, family loan, and six months of waiting to start my job I burned through $50k of savings leaving me with nada.

My initial thought is I have a plan for the SL plus chucking the entire thing at it will be like pouring water into the ocean so I will leave that alone.

I was thinking of tossing the whole thing at the $10k personal loan. By the time the bonus pays out I would have a balance of $8k on it and can pay it off in one quick swoop.

My income is at $87,750 and job is very secure. I’m in line to take over the CBO’s position for the office sometime in 2020 when he retires. He named me the successor and has been training me for the job. My income should be ~$110k with a YoY EBITA bonus. Think it’s 15%. This year we should do about $990k EBITA versus a $700k last year. 2020 we are projecting to be around $1.3M. So barring any stupidity on my part I should be ok long term.

Those couple of years were tough financially and emotionally. I got through it though. I have 5 baddies in my report from two years ago so that and basically having no savings are my collateral damage. Didn’t file a BK which I was tempted to but having a college degrees helped me keep afloat while waiting to start my new job.

Sorry for the long drawn out story as it’s hard to talk to friends and family about this. That’s why I like this place. I’m on the right path and learned important life lessons. This forum helped a lot.

Any advice on what I should do with my bonus would be helpful and appreciated.

My short term goal is to bank with Chase and the program I would like to start requires a $15k balance to waive the fee. Once I get that going I can earn at a better interest rate and have options for investment.

I will note that since my pay increases I haven’t gone on a ridiculous spending spree aside from the car.

I feel like I have just come up for fresh air and now beginning a financial rebuild. Any insight is always welcome.

[Medic981]

Two Words... EMERGENCY FUND!

You should have three to six months in liquid assets to pay bills if something were to happen. 

[Anonymous]

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@Medic981 wrote:

Two Words... EMERGENCY FUND!

You should have three to six months in liquid assets to pay bills if something were to happen. 

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+1

[Anonymous]

14.4% is very high for a personal loan, a lot of interest money to be saved there, I would pay it off and start putting monthly loan payment into savings.

[RonM21]

OP, I was thinking the same on maybe the personal loan, but then again the Savings sounded good as well. Going off of what you said, it seems to me that you have everything under control and nothing that you are making payment on is in dire need at this time.

[Revelate]

While I'm a little dubious as to the concept of six months emergency fund in the credit card era, 14.4% is a bad APR to leave hanging out there when there's money sitting around.

You can always take out another not-awesome loan if you need cash, and losing 12%+ is just one's financial life bleeding away.  Stop the bleeding, then establish whatever your cushion is... let any low APR roll till you have everything else sorted, and SL's are typically a low APR compared to most other tradelines.

[Medic981]

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@Revelate wrote:

While I'm a little dubious as to the concept of six months emergency fund in the credit card era, 14.4% is a bad APR to leave hanging out there when there's money sitting around.

You can always take out another not-awesome loan if you need cash, and losing 12%+ is just one's financial life bleeding away.  Stop the bleeding, then establish whatever your cushion is... let any low APR roll till you have everything else sorted, and SL's are typically a low APR compared to most other tradelines.

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I equate using credit cards for emergencies to keeping a gun to rob a bank as both are a bad idea. You pay off your 14.4% loan and yes stop the bleed. Three months later the something happens and you need $2,000 and put that on credit card with 24.79% APR because you have no funds to cover the need. One has to stop and ask themselves, where does the credit merry-go-round stop? Credit cards and guns are both tools that can be useful or dangerous, it just depends on how you use them. That is my two cents worth.

[Anonymous]

I got an email today from lending club of whom I had a personal loan with prior. Current loan is with my current bank Citi. The do soft pulls and sent me an email offering to refinance my curent loan with Citi at an “estimated” 8.69% at a 6 year term making my monthly payment $176.70. Current payment is $233.

A. I don’t know if this real and don’t want to risk a hard pull to find out it’s around the same rate I’m paying now.

B. I opened a car note, personal loan, and three credit cards this year. The cards were approved in September and this month. My AAoA is 6 years but the two new ones haven’t reported yet. Two of the three cards are Chase cards and I know they are skiddish with newly opened accounts.

I also have 6 inquiries the past 12 months with two of them from December 2017.

My bonus is going to be paid towards the end of the first quarter. I’ve been saving $250-$500 a check depending on my expenses. Figure I have 9 pay periods and can save about $3000 until I get my bonus they’ll give me ~$6k in savings.

I’m also getting a $7500 pay increase the first pay period of 2019 so I can apply the difference in take home to either the loan or savings.

I don’t plan on adjusting my lifestyle at all with the raise except for a new suite or two (recently lost weight and nothing fits)

At the time I applied for the loan my score was in the 650 range. It currently sits at 717 without the two new accounts. Plus less than 9% on a loan with a score in the low 700s seems like a pipe dream.

I’m inclined to pay this loan off then aggressively save once it’s paid off. I can save more but with the holidays and one more $1000 medical bill due December 1st it’ll be hard but it can be done especially once my raise goes through.

I’m setup pretty good but paying 14+% on a loan is crazy. I don’t pay any interest in CCs because I pay in full. Even with the 0% APR cards.

I suppose I can refinance but I’m hesitant to open a new account. I can see where my GW letters will get me as increasing my score will yield a better rate but I’m not holding my breath.

I put all of my expenses on a spreadsheet so I can see where my money is going and so I can plan ahead. I can save more or toss more money at the loan and take advantage of the 0% APR on the cards.

[Anonymous]

Ask her to read you a bedtime story?

JK.

I am on the emergency fund bandwagon.

Or get the best of both worlds, use the bonus to open a savings account at a CU, get a SSL at real low interest to pay off your loan, and have that savings as cash when you pay off the SSL.

[Anonymous]

Double it at the Casino, then you can have emergency funds and a paid off loan, problem solved.