‘I would like to use this extra money coming in and plan a trip for myself next year.’: How can I make the most of a short-term windfall to secure financial benefits in the long run?

Hey Money Minder,

I’m in sales, and my commission bonuses are all about that year over year growth. This week I’ve got a project in the works that’s gonna boost my commissions by more than 5 times the usual. But here’s the kicker – it’s a short-term thing. So, I’ll have a few extra thousand bucks this month, but next year, it’s gonna be back to square one.

I want to use this bonus money to plan a trip for myself next year since hitting those high numbers again will be a tough one. So, where should I stash this cash for maximum benefits a year from now? I don’t have the exact amount yet, but it’ll be between $1,000 and $6,000.

My options are an employee stock option with a 15% discount, a 401k, and an emergency fund with a decent 4.5% APY. I also have a car payment with an APR of 5.05% and 42 months left, plus a student loan of around $6,500 with a 6% interest rate.

I’m doing okay with my salary and monthly bonus, but I wanna make the most out of this extra dough. What should I do?

Later Money Minder!

Response from THE MONEY MINDER:

Hello There,

Congratulations on the success of your project and the potential for a significant bonus! It’s great to hear that you are thinking about how to best utilize this extra money for future financial benefits. Given your situation, my suggestion would be to consider focusing on paying off your last student loan with an interest rate of 6%. By allocating this bonus towards paying off this loan, you can save on the interest payments and free up more funds in the long run.

While it may be tempting to plan a trip with the extra money, prioritizing debt repayment can provide more financial stability in the future. Once you have paid off the student loan, you can then redirect the money you were putting towards the loan payment towards other financial goals or savings.

Additionally, given the interest rates on your car payment and student loan, it would be beneficial to pay off the higher interest debt first to minimize the total amount paid over time. By focusing on paying off the student loan, you can start with a clean slate and have more flexibility to plan for future financial goals.

Considering your existing investments like the employee stock options and 401k, it’s important to continue contributing to these to build long-term wealth. However, in this case, addressing the student loan may provide a more immediate financial benefit due to the interest rate.

Ultimately, the decision on how to allocate this bonus is yours to make based on your financial goals and priorities. By strategically paying off higher interest debt, you can set yourself up for a more secure financial future. All the best from THE MONEY MINDER as you navigate these financial decisions!