Hooray! Your boss decided against the Jelly of the Month Club and in favor of awarding much-deserved year-end bonuses.
Now, what to do with your windfall?
We sat down with Crystal Moore, CFO at a private equity firm in Dallas, who said you should absolutely spend 20 percent on yourself right this instant (it is your money, after all). As for the rest, here are her three suggestions:
1. Put the money into a target-date fund These retirement funds are great for short-term and long-term investors because they calibrate based on the year you want to use the money (say, 2020 for a down payment on a house or 2051 for retirement). Fidelity, T. Rowe Price and Vanguard all have great low-cost options.
2. Invest in a 401(k) or IRA If you haven?t maxed out your 401(k) contribution, you absolutely should--especially if your company matches it. Otherwise, open an IRA (either traditional or Roth) and start squirreling away for retirement.
3. Donate it to charity Making charitable contributions to qualified 501(c)(3) nonprofits is tax-deductible, provided the donations don?t exceed 50 percent of your total income. (Just be sure to ask for a receipt!) Plus, it makes you feel all warm and fuzzy.