How Would You Spend a Raise or Bonus?
Kim Lankford | Monster Contributing Writer
When we asked Monster readers what they’d be most likely to splurge on if they got a big salary bump — a new car, wardrobe or home entertainment technology — the car topped the list with 51 percent of the votes, followed by the wardrobe with 30 percent and the home entertainment center at 18 percent. But quite a few readers told us none of those choices were good options.
“How about putting the money into a retirement account, 401k or other investment?” asked one reader. “With the answers to that survey, it’s no wonder people are in debt with seemingly no way out.”
She’s right: Several key moves can make a huge difference in your financial situation — and stretch a few hundred dollars into thousands by saving you money in interest, growing tax-free, earning you free cash from your employer or protecting your savings. You don’t have to be serious with all the money, but everyone can learn from these seven steps recommended by real readers. They’re listed in the order of priority, starting with what would have the biggest impact on your finances.
1. “If I got a huge surge in salary, I would purchase health insurance for me and my husband.”
Without health insurance, big medical bills could quickly eat up your savings and jeopardize the rest of your financial plans. In fact, one of the most common causes of bankruptcy is medical expenses.
One good way to keep health insurance costs down, especially if your employer doesn’t provide coverage, is to buy a high-deductible health insurance policy. Raising the deductible will cut your premiums and enable you to open a health savings account (HSA), which can give you triple tax benefits and allows you to roll over the money year to year.
To be HSA-eligible, your health insurance policy’s deductible must be at least $1,150 for individual coverage or $2,300 for families in 2009. You can then contribute up to $3,000 for individual coverage or $5,950 for families in 2009. Those 55 and older can contribute an extra $1,000. Your contributions are tax-deductible and grow tax-deferred and then can be used tax-free for medical expenses in any year. If you still have cash in the account at age 65, you can use it for anything without penalty.