Tuesday, July 29, 2008

What Would You Do With a $5,000 Bonus? A Friend Seeks Advice

A friend of mine recently received a $5,000 bonus for coming up with a money-saving idea that will save her employer $10,000 a year. Coming up with the idea -- a plan for cutting direct mail costs -- was easy. (She's smart and resourceful.) But finding a way to use the money is becoming more of a challenge and even sparking a small disagreement with a close relative.

After taxes, she had about $3,000 in cash. So far, she has used the proceeds to buy perfume, a replacement ring for her husband, a bottle of perfume and a restaurant meal. The rest: She plans to save for a house. She and her husband are newlyweds. And once the housing market settles down, they plan to purchase their first home.

I think she has a great plan for her found money: a little bit of splurging and a lot of saving. And I told her so. But an older relatives, however, has different ideas and is urging my friend to take the found money and find some big-fun: A blow-out trip or some other big-ticket purchase to celebrate the unexpected cash.

What do you think? Do you have advice for my friend? How would you spend extra money? By the way, she's current on all of her bills and very frugal.
______________

6 comments:

Anonymous said...

pay off debts...if necessary

3 or 6 month CD while thinking about what to do with (can't fritter it away, that way); 3 months takes you to holiday buying season if a big ticket item is decided upon

long term savings for a specific use, like savings for down payment

IRA/roth IRA funding

Ryan

heather said...

if i were to suddenly have $3,000 i would:

- get the timing belt in my car replaced
- buy a small digital camera
- put $2000 in my ING Direct savings account to beef up my emergency fund
- pay an extra month on my loan

Zombie Money said...

I agree pay off debts, save the majority and use a small amount as a reward.

http://zombiemoney.blogspot.com/

StrawberryParfait said...

Honestly...

If I would take 1,000 of it and put toward any bills/debt.

I'd take 500 and go have fun.

The rest....I would totally put in a long term cd...let it earn interest (aka money you don't have to work for)

a conscious life said...

wow... $3000 is a nice chunk-o-change... I could pay off the rest of my mortgage with that... or all of my CCs and still have $ left over.

if the peeps in their life are suggesting a trip, make it a small weekend trip to a nice BB or something... then save the rest for a big purchase or a rainy day!

Marcus Aurelius said...

The house seed money is a great idea. Too bad, they could not put it to use for that purpose right now as now is a great time to buy!

Clark Howard has talked about what to do with such cash. I recall he had one caller on whose numbers hit and the guy claimed he was the recipient of a multi-million dollar (can not recall exact amount, in any event it was a huge amount) payout. The winner was torn between being miserly and blowing the whole thing.

Clark was more reasonable and suggested he splurge with about 1/3 of the funds and then stash the rest and then put the rest into savings. With that amount he would be able to find some fairly high yielding accounts and set up another income stream.

While your friend's bonus was not huge, it seems she is hitting the proportion about right. Some mad money and a good amount of savings.