How to Spend Pay Raises or Bonuses
Receiving a bonus or a pay raise is an exciting opportunity, not just for a financial boost, but for making thoughtful choices that can shape your future. Whether it’s paying off lingering debt, investing in long-term growth, or treating yourself to a meaningful experience, how you use that extra income can reflect your values and priorities. It’s a chance to strike a balance between responsibility and reward, blending smart money moves with moments that bring joy and fulfillment.
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Tackle High-Interest Debt First
If you’re carrying credit card debt or personal loans with high interest rates, using your raise or bonus to pay those down is often the best move. It’s like getting a guaranteed return—paying off a 22% APR credit card is the same as earning 22% on an investment.
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Invest in Your Future
Once high-interest debt is under control, consider allocating a portion to the stock market or retirement accounts, such as a 401(k) or IRA/Roth IRA. Even a slight increase in contributions can grow significantly over time thanks to compounding returns. If you have maxed out your retirement account, consider using a brokerage account to dollar-cost average in.
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Create Memorable Life Experiences
Spending a portion on something meaningful—like travel, a personal milestone, or learning a new skill—can be incredibly rewarding. Just make sure it doesn’t derail your financial progress. Think of it as investing in your happiness and well-being.
A Simple Split Strategy
Here’s a popular method:
- 50% toward debt repayment or savings
- 30% into investments
- 20% for a life experience or personal reward
This way, you’re building wealth, reducing liabilities, and still enjoying the fruits of your labor.
Want help tailoring this to your specific situation? Give me a call and I’d love to help you map it out.
Chris graduated from the University of Maine, where he played hockey on a scholarship, and retired from professional hockey in 2007. In the community, he remains engaged, serving as a youth hockey coach. Chris holds the CERTIFIED FINANCIAL PLANNER™. Outside the office, he enjoys trying new food and wine, reading, traveling, playing golf and hockey, fat tire biking, and donating to local charities. His passions include being a husband and dad, lake life with the family, watching his son and daughter play sports, and spending time with his wife. To learn more about Chris, connect with him on LinkedIn.
Heisten Financial, LLC is a registered investment advisor with the SEC. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results. Investments involve risk and are not guaranteed.