More for Your Money

Adam M. Grossman

AT SEVEN O’CLOCK THIS morning, as my wife and I tried in vain to wake our children for school, we heard a similar response as we went from room to room: “My head hurts.” Nobody wanted to get up.

I have to say, I don’t blame them. It’s the middle of winter here in Boston. The sky is gray and the thermometer seems stuck below zero. It can be hard for anyone to feel motivated, let alone kids facing another day in school.

But for parents, there is one thing that can make this time of year a little less unpleasant: year-end bonuses. If you are the fortunate recipient of a bonus—or if you just received a pay raise or the new tax rules have put more in your paycheck—here are 10 ideas for allocating those funds in ways that might lift both your spirits and your finances:

1. Give yourself a gift. Everyone knows the old expression that “money doesn’t buy happiness.” I generally agree with that. But recent research has shown that certain types of spending do indeed boost happiness. Among them: Buy experiences, not things. In fact, there’s an entire book devoted to the topic: Happy Money by Elizabeth Dunn and Michael Norton.

2. Give to others. It is important to give, but unfortunately the new tax rules will limit many taxpayers’ ability to deduct charitable donations. Here’s one solution: Make a big onetime contribution to a charitable gift fund, so you’re able to itemize. From that account, you can then slowly dole out money to your favorite charities.

3. Jumpstart a new account. If your household budget is stretched, it can be hard to save. That’s why year-end bonuses provide the perfect opportunity to build momentum with a new account. This might be a simple household emergency fund, a Roth IRA or a 529 education savings account for your children. An added bonus: The new tax rules now allow you to use 529s for K-12 expenses.

4. Invest in your house. Your own home is a unique investment because it’s an asset that usually grows in value over time, while also providing you with a place to live. For that reason, I see home improvements as worthwhile, because they deliver value on both counts.

5. Invest in your health. Everyone knows that health clubs love January. That’s when New Year’s resolutions cause people to buy new memberships that they end up rarely using. Why do so many people give up on the gym? One reason is the inconvenience of getting there. That’s why I think it’s smart to invest in something like a treadmill or a bicycle for your home. Yes, the price tag might seem high, but you’ll pick up valuable time in your day and I’m confident you’ll use it far more than your abandoned gym membership.

6. Invest in your skills. One of the ironies of life is that all of our education is crammed into the first 20 or so years. But it doesn’t need to be that way. These days, you can take online courses at little or no cost. Your town probably also has its own adult education program, offering hundreds of learning opportunities for nominal fees.

7. Make a dent in your most annoying debt. There are lots of strategies for paying down debt. Here’s where I like to start: with the one that you dislike the most. Maybe that’s the high-interest credit card or store credit card that hits you with $35 late fees when you forget to pay your $30 balance. Or maybe it’s your student loans at 7% or 8%. Pick one to eliminate from your life and I think you’ll experience an instant boost in happiness.

8. Put things on your calendar. According to happiness researchers, you derive tangible enjoyment from looking forward to things. If you’re planning a trip for next summer, book it now, or if you’re having a hard time getting through the winter, plan some daytrips to get you through February.

9. Get a root canal. I’m not kidding. It’s so easy to put off such things. But if you have a medical problem that’s been giving you aches and pains, sacrifice a vacation day to take care of it.

10. Get a coach. Another irony of life is that we get all kinds of coaching as kids, but rarely get any as adults. Sure, you might have a boss, but that’s not the same. If you don’t have a trusted mentor, try to find a career coach. Unlike your family and friends, who probably know you too well, an objective professional will take the time to look at you holistically and give you honest feedback. I have seen this work wonders for people.

Adam M. Grossman’s previous articles include First Things First, Grossman’s Eleven and Ten Principles. Adam is the founder of Mayport Wealth Management, a fixed-fee financial planning firm in Boston. He’s an advocate of evidence-based investing and is on a mission to lower the cost of investment advice for consumers. Follow Adam on Twitter @AdamMGrossman.

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