By: Andrew Rosen, CFP®, CEP®

My three-part series on spending your bonus dollars is now coming to a conclusion!

I’d like to discuss the impractical, or the irrational, spends as the last leg. I’ll tread somewhat carefully here, as it’s your money and you can do with it as you choose. But I certainly see plenty of situations where people aren’t getting the most bang for their buck.

Let’s take a look at a handful of bonus spending categories that could fall into the impractical, or the irrational.

  • Detrimental to your practical spend – Many times I’ve seen people go ahead and spend their bonus dollars on ‘something.’ They spend without thinking. Then, they come to me and it’s clear they’re way behind on some portion of their financial planning. While they may have accumulated a lot of stuff, their overall financial priorities are defunct and that pains me as a planner. Often, I see this in individuals who are either ill-informed of their financial situation, or who are potentially living outside their means.
  • Detrimental to your fulfillment or happiness spend – This one is in the same vain as the first category. Often people will spend a bunch of money on something they think will make them happy, but actually doesn’t. This is why I spend so much time talking about aligning your finances with areas you’re passionate about, to bring you a real sense of happiness. Rather than spending on something that leaves you empty and in the end is wasteful.
  • Puts you in debt or worse – Believe it or not, this one is more common than you think. I see people take this big influx of cash and buy something they can’t afford.  Often, it puts them in a tough financial position. They’ll purchase that boat or fancy car and the cost is more than they can handle (or should handle). When I see this happen it forces me to speak up and suggest that perhaps this purchase can wait for the future (or maybe never).
  • Keeping up with the Joneses– Is your lifestyle too big for your britches? (When was the last time you used the word britches?)  One week it’s a fancy car, the next it’s the trendy accessory, and then the country club membership. Do you feel you can never keep up with your constituents? If all your other bonus categories are sufficient and you still have money to burn, than why not spend it, right? (Although, I’d argue there are plenty of more fulfilling places to spend.) If you feel you’re getting no enjoyment out of these things and just doing it to stay part of the pack, then perhaps it’s worth taking a deeper, more inward look.

Bonus on the bonus

Money has a lot of deep-rooted emotions tied to it. Thus, the advice of spending is very nuanced and personal. This is why we encourage regular meetings with clients, to make sure their finances are aligned with their goals and the fabric of ‘who they are.’  As long as we keep an eye on those things, I’ve found you’ll be on your way to success!

Hope you enjoyed this three-part series on what to do with your bonus.   

Financial planning and Investment advisory services offered through Diversified, LLC, a registered investment advisor. Securities offered through Securities Service Network, LLC, Member FINRASIPC. Some associates of Diversified, LLC are registered representatives of Securities Service Network, LLC, a registered broker/dealer, 9729 Cogdill Road, Knoxville, TN 37932. (800) 264-5499.