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Under: Budgeting & Saving
Bonus Allocation
  • elayton
    Hi All,

    I'm trying to figure out the most responsible way to allocate my bonus this year. I've been contributing around 8% to my 401(k) over each pay period and my employer contributes a discretionary profit share amount at year end which is calculated as a percentage of total pay for the year. I have around $2500 in credit card debt, but am paying down every month. I've started my emergency savings fund, but don't have it built up to a comfortable point (6 months worth of essential expenses.)

    My real question is which one of the above should be my financial priority for the end of the year. Should I max out my 401(k), or contribute a little towards retirement and put more towards my emergency fund and debt?

    Any advice would be helpful.

    Thanks,
    E
  • FLady
    Personally, I don't think you need a large emergency fund when you have high interest debt like credit cards. I would think having $1000-2000 in an emergency fund would be enough until you get that debt paid off. I wouldn't worry about maxing out the 401(k) as long as you have contributed that 8%. I would just hit the debt hard.
  • AldenWicker
    Hey there, you might find this article useful: http://www.learnvest.com/knowledge-center/what-to-do-with-your-year-end-bonus-187/

  • spmcavoy
    I think Alden's link gave you great advise, I would pay down as much of the CC debt as you can - even if it's just a hefty chunk.

    I think that if you have been contributing 8% throughout the year, your emergency fund should be your next priority, putting a good chunk in there too.

    as FLady says, as long as there is money in your emergency fund, hit the debt first. Then, any future money that should be going to the CC can be filed into your emergency fund!

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