Eric Skrum, Wisconsin Bankers Association
608/441-1216 | (c) 608/445-6430 | [email protected]
The state expects to take in $753 million more through the summer of 2021 than earlier estimated, giving lawmakers a windfall as they work on the state budget. However, elected officials are split on what to do with the windfall.
There’s good news! The state can apply basic financial literacy principles to this welcome event. The following recommendations are based on tips from financial experts on how to best leverage an unexpected windfall or bonus.
5 Smart Things to do with Your Bonus:
Dear State of Wisconsin,
Congratulations on your unexpected financial windfall! Here are a few ways you can help make this extra cash go a little further and feel confident in your future:
Save for a rainy day – (Pro Tip: Put some money in the Rainy Day Fund)
Experts recommend having three to six months of income in an accessible savings account in case of unexpected emergencies like a job loss, natural disaster, or even car trouble. This can give you peace of mind and a backup plan for anything unexpected that may come your way.
Pay down your debt – (Pro-Tip: Pay down some of our road debt)
If you have high-interest debt looming over you, bonus money is a good way to make a dent in the balance… or possibly pay off the debt entirely!
Invest in yourself – (Pro Tip: Invest in agriculture/roads/education)
Investing in yourself is one of the best returns on investment you can get. Whether it’s investing in learning a new skill, developing yourself personally or professionally, tapping into your creativity or hiring a coach, you need to give to yourself first before you can give to others. It is our responsibility to take the time to develop our gifts and talents so we can best serve others.
Share the wealth – (Pro-Tip: Lower taxes)
At least one study suggests that money can indeed buy happiness—if you spend it on others. Sarah Gervais, an associate professor of psychology at the University of Nebraska-Lincoln, wrote that when researchers evaluated people’s happiness before and after spending a bonus, they found greater joy among those who use the money on others.
Don’t get too reliant – (Pro-Tip: Don’t build everything into the base)
Planning your biennial budget around a bonus that may or may not come can result in dangerous lifestyle creep. One of the things that can be hard for people who have a repeat bonus that’s relatively similar for several years is they start to look at that as an extra paycheck each year, and it’s really not. So, don’t budget it into your day-to-day expenses.