Were you one of the few who was eligible for and received a bonus this year? If so, congratulations on your hard work, you deserved it. Now that we’ve gotten those formalities out of the way, I want to stick a little bug in your ear as to how I believe you should be spending that money. Number one on that list should be, and should always be until you’re retired, retirement and for that I’m only recommending a modest contribution.
If you haven’t maxed out your Roth IRA ($4,000 in 2007), may I recommend that you take that bonus and do so. The Roth IRA is a great way to invest tax free (you pay taxes today, it appreciates and you never pay capital gains again) for your retirement and acts as a good diversification against your typical tax-deferred 401k plan. My personal favorite in terms of investments is a target retirement fund or an index fund, but you can select whatever it is you’d like! You have until April 15th to file your taxes and make your final contributions to a Roth IRA. One word of advice, if you do contribute in 2008, you’ll have to specify that your contribution is for 2007. If you’ve maximized your Roth IRA for 2007, consider getting a head start on 2008 ($5,000 limit)!
If you’ve already maximized your Roth IRA, then pad that emergency fund. I hear that 2008 is going to be a risky year so you’re going to want to have a little extra stored away. If you have several months of expenses saved in an emergency fund already, kudos to you! My next recommendation is a Bentley Continental GTC.
Happy Holidays!