{"id":18036,"date":"2026-01-05T13:37:39","date_gmt":"2026-01-05T21:37:39","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=18036"},"modified":"2026-01-06T12:15:52","modified_gmt":"2026-01-06T20:15:52","slug":"what-to-do-with-bonus-or-raise","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/what-to-do-with-bonus-or-raise\/","title":{"rendered":"What To Do With Your Raise or Bonus"},"content":{"rendered":"\n<p>It\u2019s that time of year\u2014bonus and raise season is here, and if you\u2019re lucky enough to be feeling more flush with cash than usual, you\u2019ll need a plan. It\u2019s exciting to see your hard work rewarded with additional compensation. But once you\u2019ve spent a small portion of your bonus or raise on something fun (you earned it, after all!) it&#8217;s important to think through how you can put some of your newfound wealth to work so it supports your long-term financial health. You might assume that having more money means you don\u2019t need to worry as much, but you should still watch out for common pitfalls like lifestyle creep and cash drag.&nbsp;<\/p>\n\n\n\n<p>In this post, we\u2019ll walk you through some dos and don\u2019ts for handling a bonus or raise (or any other windfall, because the same logic applies).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What to do with your bonus or raise<\/h2>\n\n\n\n<p>After you\u2019ve celebrated your raise or bonus a little (whether it\u2019s buying something you\u2019ve had your eye on, or making a charitable donation to a cause you find meaningful), here are some suggestions for putting your extra cash to work.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Max out your IRA for the 2025 tax year if you haven\u2019t already:<\/strong> It\u2019s counterintuitive, but the deadline to fund your IRA for the 2025 tax year is actually in 2026\u2014on tax day (Wednesday, April 15). If you\u2019ve been meaning to set aside money for retirement but haven\u2019t gotten around to it, there\u2019s still time to do so. IRAs are one of the most powerful ways to save for retirement, thanks to their <a href=\"https:\/\/www.wealthfront.com\/blog\/ira-benefits-and-drawbacks\/\">numerous benefits<\/a>: tax advantages, many investment options, and in some cases, a surprising amount of flexibility (although it\u2019s important to note that there are still restrictions on your ability to withdraw funds early). <a href=\"https:\/\/www.wealthfront.com\/retirement\">Wealthfront offers traditional, Roth, and SEP IRAs<\/a> that are automated, customizable, and personalized to your risk tolerance. For more information about which type of IRA could be right for you, check out our <a href=\"https:\/\/www.wealthfront.com\/ira-calculator\">IRA calculator<\/a>.<\/li>\n\n\n\n<li><strong>Add to your emergency fund:<\/strong> An <a href=\"https:\/\/www.wealthfront.com\/blog\/build-emergency-fund\/\">emergency fund<\/a> is important for a variety of reasons \u2014 it gives you peace of mind and a good financial buffer in case of job loss or large unforeseen expenses. Even if you set up your emergency fund a long time ago, now\u2019s a good time to revisit it and make sure it still reflects three to six months\u2019 worth of your current expenses. We\u2019ve all experienced inflation over the last couple of years, and it\u2019s possible some of your costs have risen enough to justify revisiting the total sum you need. Once you\u2019ve done that, we think it\u2019s smart to ensure you\u2019re keeping that emergency fund in a high-yield savings account, as they often offer an APY (annual percentage yield) that\u2019s many times higher than the national average. Wealthfront\u2019s <a href=\"https:\/\/www.wealthfront.com\/cash\">high-yield Cash Account<\/a> offers an industry-leading APY of 3.30% and up to $8 million of FDIC insurance through our program banks.<\/li>\n\n\n\n<li><strong>Invest it for your long-term goals:<\/strong> Investing your bonus or raise can pay dividends both literally and figuratively for years to come, and can help you avoid cash drag (more on that below). If you received a bonus and have already completed the steps above, consider adding it to your investments, either all at once or by <a href=\"https:\/\/www.investopedia.com\/terms\/d\/dollarcostaveraging.asp\">dollar-cost averaging<\/a> it into the market over time. If you get a raise, consider increasing the amount that you invest on a regular basis. If you previously invested $1,000 a month but got a raise, maybe you up your recurring investment to $1,200 instead.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">What to avoid with your bonus or raise<\/h2>\n\n\n\n<p>You should be intentional about what you do with your bonus or raise. That means you would ideally avoid the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Lifestyle creep:<\/strong> Over time, as you earn more money, it\u2019s easy to unintentionally start spending it on slightly nicer things and small upgrades. For example, maybe booking an economy plus airplane seat used to be a big splurge for you\u2014then you got a raise, and you started doing it every time you traveled. Or maybe you used to order takeout once a week, but bumped that up to twice a week after you got your annual bonus. These are just examples, but you can imagine how making a bunch of these changes over time could quietly eat up a big chunk of your additional income. The key, we believe, is to be intentional about increasing your spending. It\u2019s natural to spend more as you earn more, but it\u2019s wise to keep an eye on the details so you can also direct additional money towards your long-term goals. In practice, one way to do this is to set new savings goals as soon as you receive additional income and set aside money for those goals first. Then, you can increase your spending (intentionally!) with what\u2019s left.&nbsp;<\/li>\n\n\n\n<li><strong>Earning too little on your cash:<\/strong> Cash can be very useful, but <a href=\"https:\/\/www.wealthfront.com\/blog\/3-signs-youre-holding-too-much-cash\/\">it\u2019s possible to have too much<\/a>\u2014leading to what\u2019s known as \u201ccash drag.\u201d If you let excess cash pile up in your checking, savings, or cash management account because you\u2019re not sure what else to do with it, you could miss out on valuable opportunities to turn that cash into long-term wealth by investing it. The interest rate you can earn on cash often isn\u2019t enough to keep up with the rate of <a href=\"https:\/\/www.wealthfront.com\/blog\/q-and-a-inflation\/\">inflation<\/a>\u2014and that means over time, your cash can actually lose buying power. Investing your money can help you keep up with inflation and avoid this loss of buying power.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Build wealth on your own terms<\/h2>\n\n\n\n<p>At Wealthfront, we offer a variety of products across the risk spectrum\u2014ranging from a high-yield <a href=\"https:\/\/www.wealthfront.com\/cash\">Cash Account<\/a> to globally diversified <a href=\"https:\/\/www.wealthfront.com\/investing\">Automated Investing Accounts<\/a> and no-commission <a href=\"https:\/\/www.wealthfront.com\/stock-investing\">Stock Investing Accounts<\/a>\u2014all designed to help you grow your wealth. No matter what you decide to do with your raise or bonus, we\u2019re here to help you put it to work for the long term. Congratulations!&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>It\u2019s that time of year\u2014bonus and raise season is here, and if you\u2019re lucky enough to be feeling more flush with cash than usual, you\u2019ll need a plan. It\u2019s exciting to see your hard work rewarded with additional compensation. But once you\u2019ve spent a small portion of your bonus or raise on something fun (you [&hellip;]<\/p>\n","protected":false},"author":10000,"featured_media":18039,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1282,2390],"tags":[],"coauthors":[2505],"class_list":["post-18036","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","category-saving"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Dos and Don\u2019ts for Your Raise or Bonus | Wealthfront<\/title>\n<meta name=\"description\" content=\"How to avoid common pitfalls like lifestyle creep and cash drag so your raise or bonus works harder for you.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, 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