Author Topic: Bonus from work. Where to put it.  (Read 7789 times)

Bearblastbeats

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Bonus from work. Where to put it.
« on: March 28, 2016, 06:36:22 AM »
I'm getting a pretty decent bonus from work this week $5k before taxes, so probably close to $4200 after taxes...

Either way, It'll be a great help to my finances and I am curious as to where I should put it.

I can either pay off the remainder on my car or stash it away and keep adding to it until I am ready to buy a house and use it as a down payment.

Thoughts?

Abel

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Re: Bonus from work. Where to put it.
« Reply #1 on: March 28, 2016, 06:55:33 AM »
I'm getting a pretty decent bonus from work this week $5k before taxes, so probably close to $4200 after taxes...

Either way, It'll be a great help to my finances and I am curious as to where I should put it.

I can either pay off the remainder on my car or stash it away and keep adding to it until I am ready to buy a house and use it as a down payment.

Thoughts?

Get out of that debt emergency! I'd pay off the car and continue the good work towards saving a down payment.

slappy

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Re: Bonus from work. Where to put it.
« Reply #2 on: March 28, 2016, 07:07:54 AM »
Don't they tax extra taxes out of bonuses? Or tax them at the highest rate? When I get a bonus, it usually ends up being about 50% net, after accounting for 401k and taxes.

Bearblastbeats

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Re: Bonus from work. Where to put it.
« Reply #3 on: March 28, 2016, 07:10:54 AM »
Don't they tax extra taxes out of bonuses? Or tax them at the highest rate? When I get a bonus, it usually ends up being about 50% net, after accounting for 401k and taxes.

Well, I don't know because I've never received a bonus before.

boarder42

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Re: Bonus from work. Where to put it.
« Reply #4 on: March 28, 2016, 07:13:02 AM »
Don't they tax extra taxes out of bonuses? Or tax them at the highest rate? When I get a bonus, it usually ends up being about 50% net, after accounting for 401k and taxes.

Well, I don't know because I've never received a bonus before.

bonus's dont get "taxed extra"  but they are typically withheld at a higher rate b/c they dont know how it affects your income entirely so they withhold at 25% minimum usually.  depending on what the rate is on that car would help determine if its worth paying off.  5 or less i would invest the money for a downpayment on a house.

RWD

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Re: Bonus from work. Where to put it.
« Reply #5 on: March 28, 2016, 07:23:23 AM »
As mentioned above, you're likely to receive much less than $4200. My rough guess would be $3000-3500, but it depends on your company's payroll system. If too much is withheld you will get it back when you file your taxes next year, of course.

What is the interest rate on your car loan?

Bearblastbeats

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Re: Bonus from work. Where to put it.
« Reply #6 on: March 28, 2016, 07:29:11 AM »
I owe $5110 at an interest rate of 19.76%. :/

mandy_2002

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Re: Bonus from work. Where to put it.
« Reply #7 on: March 28, 2016, 07:29:25 AM »
The way our payroll system taxes is to assume that what you made in this single check is what you make all year with your withholdings taken into account. I've had bonuses where it was 50% of the original amount, but that includes the normal SS/Med/State/Federal taxes. For me, the federal withholdings have been in the area of 35%.

RWD

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Re: Bonus from work. Where to put it.
« Reply #8 on: March 28, 2016, 07:31:40 AM »
I owe $5110 at an interest rate of 19.76%. :/

Wow! Yeah, pay that off ASAP.

Trip

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Re: Bonus from work. Where to put it.
« Reply #9 on: March 28, 2016, 07:36:53 AM »
I owe $5110 at an interest rate of 19.76%. :/

Throw every penny you can at that. That rate is crazy high. Just to put it in perspective, if you could invest a one-time amount of $5,110 at 19.76% compounded monthly for 10 years, it would come out to about $36,274.20!

Pay that off ASAP

Bearblastbeats

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Re: Bonus from work. Where to put it.
« Reply #10 on: March 28, 2016, 07:39:34 AM »
Yes that's crazy high but it's what I had to get unfortunately when I needed the car.

Trip

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Re: Bonus from work. Where to put it.
« Reply #11 on: March 28, 2016, 07:52:01 AM »
Understandable, you can't change the past or what the circumstances required at the time. Just pay them off as quickly as you can now.

slappy

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Re: Bonus from work. Where to put it.
« Reply #12 on: March 28, 2016, 07:53:01 AM »
Whatever the bonus amount ends up being, definitely put it towards the car payment.  How much do you have in your down payment savings? Can you throw some of that at the rest of it, just to get it paid off?

Bearblastbeats

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Re: Bonus from work. Where to put it.
« Reply #13 on: March 28, 2016, 07:57:19 AM »
LMAO. This bonus will be all of my money outside of my paychecks. So I can throw it all towards that and then just live paycheck to paycheck as I have been.

boarder42

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Re: Bonus from work. Where to put it.
« Reply #14 on: March 28, 2016, 08:46:32 AM »
LMAO. This bonus will be all of my money outside of my paychecks. So I can throw it all towards that and then just live paycheck to paycheck as I have been.

you're living paycheck to paycheck you probably should do a case study and throw your finances out there so we can help you trim fat

slugline

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Re: Bonus from work. Where to put it.
« Reply #15 on: March 28, 2016, 01:55:10 PM »
I owe $5110 at an interest rate of 19.76%. :/

Wow! Yeah, pay that off ASAP.

+1

Keeping that kind of debt around while trying to save for a house downpayment is like driving a car down the highway with a boat anchor dragging from the rear bumper. It can be done, slowly . . . but you could be going faster if you could just cut it loose!  If that's the interest rate you "had to get" I'm guessing your credit profile needs some work/time to clean up anyway before you start house hunting.

GrOW

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Re: Bonus from work. Where to put it.
« Reply #16 on: March 28, 2016, 02:32:30 PM »
I owe $5110 at an interest rate of 19.76%. :/

Wow! Yeah, pay that off ASAP.

Agreed. At that rate, it beats my first thought which was to add to your 401k plan or, if you have one, HSA. The tax treatment is so darn favorable but not enough to be ~20% rate on that loan. Eat PB&J for a month if needed to finish paying it off. It will be such a huge win for you when its gone. Good luck!

Bearblastbeats

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Re: Bonus from work. Where to put it.
« Reply #17 on: March 29, 2016, 06:22:59 AM »
My only concern is that if I take the bonus and pay off the car, it alleviates any "oh shit" fund. Yea, I could have this car finally paid off but then the day after my engine goes or something.

I guess its a gamble either way I cut it. I've been paying on this loan for 3 years, my credit is getting back up there, slowly. I don't know much else I can do.

boarder42

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Re: Bonus from work. Where to put it.
« Reply #18 on: March 29, 2016, 06:28:00 AM »
My only concern is that if I take the bonus and pay off the car, it alleviates any "oh shit" fund. Yea, I could have this car finally paid off but then the day after my engine goes or something.

I guess its a gamble either way I cut it. I've been paying on this loan for 3 years, my credit is getting back up there, slowly. I don't know much else I can do.

this random 5k bonus you got was going to be your o shit fund

do a case study you're bleading money somewhere in your life.

slappy

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Re: Bonus from work. Where to put it.
« Reply #19 on: March 29, 2016, 06:33:59 AM »
Maybe you can look at refinancing the car with a local credit union? I see your concern about not having an Efund, but even using a credit card for an efund would have the same or better interest rate than the car.

11ducks

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Re: Bonus from work. Where to put it.
« Reply #20 on: March 30, 2016, 01:46:21 AM »
My only concern is that if I take the bonus and pay off the car, it alleviates any "oh shit" fund. Yea, I could have this car finally paid off but then the day after my engine goes or something.

I guess its a gamble either way I cut it. I've been paying on this loan for 3 years, my credit is getting back up there, slowly. I don't know much else I can do.

You don't have an 'oh shit' fund, you are living paycheck to paycheck. If you don't pay it off, and the engine blows, and you spend the $5k windfall on fixing your car, you will still owe $5k @ 20% interest, for your car.
If you do pay it off, and the engine blows, hopefully you can get a lower interest rate on the next loan as you've shown you can pay it off.

However, if you pay it off, and the car doesn't explode, then you can start putting aside the $xxx monthly car payments to create a proper emergency fund. Seriously, +1 on the case study.

Bearblastbeats

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Re: Bonus from work. Where to put it.
« Reply #21 on: March 30, 2016, 07:47:01 AM »
What if I refinance my car loan. It's at a 20% APR. So I'll be getting into another loan but at a lower APR.. I'm not entirely sure how that works since won't I be borrowing more money?

What if I traded in my car for something newer with a lot less miles? New loan, lower APR, won't need to worry about the car exploding.

RWD

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Re: Bonus from work. Where to put it.
« Reply #22 on: March 30, 2016, 08:08:21 AM »
What if I refinance my car loan. It's at a 20% APR. So I'll be getting into another loan but at a lower APR.. I'm not entirely sure how that works since won't I be borrowing more money?

What if I traded in my car for something newer with a lot less miles? New loan, lower APR, won't need to worry about the car exploding.
Refinancing could help. If you can get it under 4% then it's not as urgent to pay it off.

Whether you replace your car should be considered separately from the loan. You shouldn't buy a new car just for better loan terms. Also, don't trade your car in at a dealer. You're typically much better off doing a private sale.

NoStacheOhio

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Re: Bonus from work. Where to put it.
« Reply #23 on: March 30, 2016, 08:36:19 AM »
What if I refinance my car loan. It's at a 20% APR. So I'll be getting into another loan but at a lower APR.. I'm not entirely sure how that works since won't I be borrowing more money?

You would basically just owe the same amount at a lower interest rate. You're using borrowed money to repay borrowed money. The effect on your NW is null, but the interest won't be eating your paychecks the way it is now.

boarder42

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Re: Bonus from work. Where to put it.
« Reply #24 on: March 30, 2016, 09:02:45 AM »
I still dont understand why the focus is on what is clearly a symptom of a lot larger problem for the OP. 

You need to re-evaluate all finances.  this 5k going to an e-fund vs a car loan is pretty irrelevant in the grand scheme of your full and apparently awful financial past.  you need to figure out many more things than how to spend this 5k .