Good financial fortune is smiling upon me this month. It turns out that I over-paid my 2015 income taxes and am due a refund! Note to self: adjust my 2015 withholding. On top of that, I was excited to learn that my employer is paying a bonus due to the company’s solid 2015 performance. Between these two surprises, it’s enough of a windfall to warrant some time to consider how to use it.
My first impulse is “What can I buy with this!?” Ugh. I’m sure that’s a natural reaction, but not productive in ways that I’d like. I will surely spend some of it, but not until other financial priorities are met. Here’s my plan:
Pay off credit card (20%) – I use one of my credit cards regularly to earn 1.5% cash back (then apply it to the balance). I pay it off in full each month to avoid interest. I recently paid my annual condo insurance using the card, and now have a larger balance than usual that will need to be blown away in the coming weeks.
Roth IRA (10%) – I automatically deposit $150 monthly to my Roth IRA ($1,800 for the year). With the annual maximum being $5,500, this is an excellent opportunity to fund it up!
Niece/nephew college fund (6%) – A portion of my Betterment account is allocated to the education of my niece and nephew. I only drop $25 per month into it, but it’s better than nothing. I haven’t decided how to use it once they reach college age. I could buy their books, chip in on tuition or housing, or even take them on an international trip (my favorite idea). With my nephew now a few years from high school graduation, dropping a larger amount into this fund would be prudent.
Fun stuff (4%) – I can’t deny myself a little treat at the mall, so just a wee portion will go to picking up clothing pieces that I’ve wanted ever since doing my capsule wardrobe in January. I’ve got my eye on a new pair of jeans, a pair of booties, and a few tops.
Plain old savings (60%) – All that remains will go into my not-too-thrilling-but-very-important online savings account. If I want to get real about taking a mini-retirement break in the next couple of years, this needs to be funded up more.
*Bonus bonus* – My automatic 401k deduction (18%) was taken from my bonus check. Woot!