Question about bonus (kind of long)

**BMEPhDinCO** · 09-21-2011, 11:10 AM

My thoughts depend on whether you have a mortgage (you want to buy furniture?), whether you have a partner, and where you'll be stationed...

Assuming you will be stationed in the USA, have no mortgage, and are single, here are recommendations:

1. Pay off truck, car loans suck to keep around!
2. Bump EF to $5k
Max Roth for the year ($5k)

That leaves just over $10,000 for other stuff...
1. If you have time and want to travel, go ahead and put $2,000 for that (plus whatever's left over the $10k)
2. $5,000 TSP contribution if you want (but note this article that it might be changing before you do for sure: Obama's Deficit-Reduction Plan Takes Aim At Military Retirement System | Fox News and this one: TSP delays Roth option -- GovExec.com)
3. $2,000 furniture
4. $1,000 to individual stocks (look at ones that return a dividend)

If you have a mortgage or a partner, make sure to take those into account but otherwise I think the above is a good policy and will put you in a good position....then the other three yearly bonuses I'd do the following:
1 - car replacement fund
2 - set up "buckets" for other saving goals - travel, house, auto, misc, pet, whatever
3 - position yourself for job searching when you get out with this year's bonus

good luck!

**WDELTA** · 09-21-2011, 11:38 AM

No mortgage for me. And no significant other (significant enough to play into my financial decisions at this point.)

I'm actually deployed right now. All of my stuff is in storage, but I donated/threw away most of my furniture before I left for the Middle East. When I get home I'll be PCSing shortly, still don't know where or when though. All I really have is some living room furniture, so I was gonna finally buy some nice bedroom stuff, and maybe a classy used kitchen table.

**kork13** · 09-21-2011, 01:16 PM

Congrats on the re-enlistment!
I agree with BME, first 3 priorities should be:
1) Pay off the truck -- you can then start to save/invest the payment you no longer have to make.
2) Max your Roth IRA for this year ($5k total). Next year (and from then on out), start to max it out in January ($416/mo).
3) EF. $5k is fine, but I would really recommend going a higher than that. I'm in the military as well, so I understand the job security thing...that's why my EF is lower than most recommend as well ($15k, about 3 months' pay). But $5k really doesn't cover much, and life happens (and it tends to do so all at once). Bump it to $5k for now, but I'd recommend building it up over time to at least $10k. Not that you expect something to happen, but so you're ready if it does.

That speaks for most of the initial payment ($21k), but sets you up VERY well for the future. After that, it just depends on what you want to do:
4) TSP is a good option, or you can skip it for now and go with mutual funds in a standard investment account. I wouldn't recommend individual stocks for now... Brokerage trading fees are killer if you're working with small amounts ($5k-$10k). Rather, use no-fee, low-expense mutual funds, and you can do all of the same with better diversification. On-going, however, you should save for retirement with the TSP as you can, even if it's just 5-10% of your base pay for now.
5) Spending as required. It's your bonus, use it as you like. Furniture, travel, TV, or whatever. As long as you take care of the saving piece first, spend what you need/want. Just as a rule of thumb I personally use, for any bonus or raise, save at least 50%, then the rest is play money to use as desired (whether to save further, or spend it on something).

Since you're deployed, I'll bring up this as well... Have you been using the Savings Deposit Program? You can save up to $10k and make 10% interest on it while you're deployed and for 3 months after you return. Even if your deployment finishes next month, it's still worth getting into now if you haven't already.

Question about bonus (kind of long)