Dear Chuck,

I expect a decent year-end bonus and am trying to decide how best to use it. I want to grow our investment portfolio while my wife thinks we should pay off all debt. What would you recommend? 

Blessed with a Bonus 

Dear Blessed with a Bonus, 

Congratulations! This is a nice problem to have around Christmastime!

I’m glad to hear you don’t want to spend it on yourselves or blow it all on one “big” Christmas! Or splurge on the latest iPhone or luxury vacation as a reward for all the hard work. That’s what many do. Wise action will provide far greater rewards!

I don’t know your financial situation, the amount of total debt you carry, or the size of your bonus. All that and more personal details would be helpful; but regardless, I think you and your wife should compromise and find unity in the use of your bonus. If you do that, my advice is likely not necessary. 

My wife, like yours, hates debt and finds security in owing no money to anyone. Like you, I enjoy investing and watching funds grow. The key to financial harmony in marriage is to listen and make plans together. So, pray together and separately ask God for wisdom in this decision as you apply these Proverbs: 

Commit your work to the Lord and your plans will be established. (Proverbs 16:3 ESV)

The heart of man plans his way, but the Lord establishes his steps. (Proverbs 16:9 ESV)

A Suggested Plan for Your Bonus

1. Don’t spend it until it’s in the bank! Or as my wife would say, “Don’t bank on presumption!”
2. Give cheerfully first as led by Christ and in unity with your wife.
3. Pay down personal loans and credit card debt with high interest rates. Do you have any auto loans, student debt or mortgage? I agree with the advice of Stephen Williams, of BMO Private Bank. He says it is best to attack credit card debt. “Pay that down or pay it off completely with the bonus, because if you’re paying credit card interest of 15 percent, it doesn’t really make any sense to invest money in the stock market and hope you outpace the 15 percent. That’s a tough ask.”
4. Fund an Emergency Account. Since you already invest, I assume you have at least $1000 set aside. You should aim to have 3-6 months expenses in a secure account. This will give you peace of mind in the event of an unexpected job loss, illness, or catastrophic event. 
5. Invest: Max out a 401(k) and take advantage of your company’s match program. If that’s not an option max out an IRA. The Roth doesn’t have any upfront benefit, but contributions and earnings are withdrawn tax-free when you reach a certain age. Mind the income cap. With a traditional IRA you’re taxed on contributions and earnings. Max out your HSA – health savings account. You can keep it for as long as you want, even if you change jobs. While available for qualifying medical care, you can also use it in retirement planning. Consider investing in low-cost index funds like Warren Buffett recommends. Or consider investing in yourself by enrolling in a course to increase your skills, a conference to build your network, or a good pair of tennis shoes for your health.
6. Plan for large expenses in the future – home, car, vacation, or starting a business. 
7. Will you owe taxes? Consider setting a sum aside to cover that.

If you want a tangible reminder of your hard work this year, discuss with your wife how that might look. It could be a special dinner together, a day devoted to something you both enjoy, or an overnight getaway. Just remember that your marriage deserves more attention than your career and money. In fact, a good marriage is associated with greater levels of upward economic mobility.  My wife and I wrote a book called, Money Problems, Marriage Solutions; it would make a great Christmas present! 

Remember to thank God for His generous provision. Merry Christmas to you and yours.

Originally posted on the Christian Post, December 20, 2019.