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Getting a bonus can feel like winning a small lottery. But if you’re tempted to splurge with it, don’t forget to consider your financial future, too. Maybe use 10% or 20% to treat yourself, and put the rest toward something that will have a lasting impact.

Need guidance? Here are five ways to make your bonus really matter.

1. Pay down credit cards. If you're carrying a credit card balance, paying it off (or at least down) is arguably the best use of your bonus. Credit cards have some of the highest interest rates of any loan — especially in today’s economy — charging over 22%, on average. And the interest compounds daily, costing you more with each passing day.

For example, depending on how slowly you pay it off, a $5,000 credit card balance with a 22% APR could wind up costing you more than $5,000 just in interest. (It would cost $1,750 in interest if you’re paying $200 a month, $8,678 if you’re paying $100 a month.)

Why not use your bonus to break free of this burden and free up more of your hard-earned cash in the future? (This SoFi calculator can do the math for you.)

2. Supercharge your retirement savings or Health Savings Account (HSA). Even if you're already contributing regularly to your 401(k) or IRA, adding a lump sum can leave you with a substantially larger nest egg when you retire, thanks to the power of compound growth.

Or, if you have one, add your bonus to your HSA, which could become even more valuable as healthcare costs rise. HSA funds not only never expire, but they can be invested and even become a stealth retirement savings vehicle.

Plus, maxing out these types of tax-advantaged accounts lowers your taxable income for the year.

Bonus tip: If you've already maxed out your 401(k) and don’t have a high-deductible plan, consider funding a Roth IRA with after-tax money. There’s no immediate tax benefit, but your investment earnings and all qualified withdrawals will be tax-free once you’re retired, when you could be in a higher tax bracket.

3. Build up your emergency savings. If you haven’t bulked up your savings, adding your bonus can give you peace of mind. Maybe you’re not sure if you’ll have enough to bridge the gap if you’re laid off, your car breaks down, or there’s a medical emergency.

Whatever happens, having enough in your emergency fund can help you avoid accruing debt (and unnecessary stress) to cover unexpected expenses. (Ideally, you’ll have enough saved to cover three to six months’ worth of living expenses.)

Pro tip: Use a high-yield savings account to earn interest while keeping your money accessible.

4. Save for other stuff. Beyond emergencies and retirement, your bonus can jumpstart savings for specific goals like home renovations or a special vacation. Or, wouldn’t it be nice to have money set aside for something unexpectedly good instead of bad? Consider starting an “opportunity fund.” Maybe you discover your new side hustle is going well enough to require more equipment or a website upgrade. Or you get a new job on the other side of the country and need money for your move.

Whatever you’re saving for, keeping the funds separated or in a dedicated account will make them less tempting to dip into. (We like the Vaults feature of SoFi high-yield accounts.)

5. Prepay to get the discount. There are many expenses that can cost less if you prepay — or pay for the entire year rather than month-by-month. These include:

•   Insurance premiums (auto, home, life)

•   Property (HOA fees, property taxes)

•   Education (tuition, daycare, music lessons)

•   Memberships (gym, Amazon Prime, streaming services)

•   Utilities (internet, security monitoring)

•   Healthcare (dental work, LASIK)

•   Professional (software subscriptions, licenses)

If the discount is sizable, consider paying ahead to get the best bang for your buck. (Just make sure these costs will continue to be part of your life — or that they’re refundable if things change.)

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

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