You might think I’m a little premature with the title for this post, but I disagree! It’s annual raise and bonus time at work, also known as the greatest time of the year. I feel like I work all year just to find out my raise and bonus annually. And to top it off, this year I got a promotion as well.
The other day a friend and coworker IM’ed me at work asking what I was going to do with my bonus. Of course I responded and said “saving it!” She responded by saying I need to live a little. Too bad padding my investment accounts gives me a lot more happiness than spending it!
As part of my Millionaire To-Do List I want to save 75% of each raise and bonus. I actually saved 100% of my bonus this year (that didn’t go to taxes) and as my expenses haven’t increased lately, I plan on saving approximately 100% of the raise as well.
How I spent it (watch out for the humblebrags, they come out of nowhere):
1) I adjusted my 401k contribution percentage right before the bonus paycheck and have maxed out my 401k for the year! I was planning on getting there by November, but thought “why not?” and jacked up my contribution percentage to get there in September.
2) I then used $1,000 to max out my 2015 Roth IRA for the year.
3) The remainder will go straight into my after-tax Vanguard brokerage account.
This will be the first year I’ve ever maxed out my 401k, and I’ve done it in the ninth month of the year! I also didn’t even have an IRA account open until 2015, and have maxed out both my 2014 and 2015 contribution limits this year. As you can see, I go 0 to 100 real quick! All kidding aside, it just amazes me how fast I was able to go from putzing around saving a little here and there and contributing to my 401k, to maxing out my 401k, IRA, and HSA. All I needed was some motivation and a plan of attack. This was also a huge year in the fact I reached my first $100k in net worth. Thank you everyone for the words of wisdom and encouragement along the way!
I really like the idea of using my bonus to max out my 401k as the money is already invested before it can even reach my checking account and become spendable. This also means that every remaining paycheck for the rest of the year will be substantially higher since I will not have a 401k contribution being deducted. This will be awesome since I’ll be able to contribute a lot more than usual to my after-tax brokerage account for the final three and a half months of 2015. Sometimes it feels like I’m concentrating so much on tax advantaged accounts, that I deem untouchable, and therefore my personal after-tax brokerage account doesn’t the same love and attention. So it will definitely be nice to boost this account throughout the remainder of 2015.
Hopefully all this time and hard work will enable me to move up my Financial Independence Day from September 2026. I’ll reevaluate once 2015 comes to a close. Hopefully everyone else is having a financially successful 2015 as well.
If you get variable compensation such as a bonus do you sock it all away, or let yourself splurge a little? Have you maxed out your 401k or IRA already this year?