End of year bonus
Seeking some advice on what people do with 'bonus' money (some coming my way with my end of year pay cheque!). In life pre-YNAB I would simply stick a chunk of it in savings (I'm debt free at the moment) and maybe use some of it to pay for once-off things, like a holiday in January or joining fees for a gym, but I have never consciously thought about the way I allocate it. I have one or two little things planned of this type still to do, but I figure I will have an extra sum tbb in addition to covering my January sums in full. Should I use this to budget ahead into February, or should I just put it whatever is leftover as a chunk into my savings and budget February from my end-of-January paycheque? I know it's 'extra money' no matter how I look at it, but what is the YNAB way?
I get quarterly bonuses and Mrs. nolesule gets an annual bonus. We look at our categories and decide which ones to shore up based on our priorities.
The first thing I do is calculate our expected marginal tax rate on the bonus and compare it to the tax withholding, and if the marginal rate is higher, then we set aside the difference in case we need to pay some additional taxes.
After that, we usually we almost always put some toward our spending money (his, hers, family) as a spending reward, but not all that much.
We also put a chunk toward charitable giving, and because we max out all our tax-advantaged accounts, taxable investing at Vanguard.
After that, we usually spread it around in areas like Home Improvement (we want to redo the floors), Vacations, and maybe some other categories that could use a little more funds.
Ultimately, it's up to you and your priorities.