What to Do with a Signing Bonus

You've worked your butt off, passed all your board and licensing exams, graduated and landed your dream job. What could be better than landing your dream job and receiving a signing bonus also? According to a 2016 research publication by the National Association of Colleges and Employers, 52% of employers plan to offer signing bonuses to new graduates. You may be among those who will receive such a bonus but have you thought of what to do with this extra money?

Here are a few things you can do wit that "extra money"

1. Put towards immediate expenses

A new job may mean that you have to relocate to a new city. If the job does not cover relocation expenses, consider using a portion of your signing bonus to cover moving costs and apartment rental deposits. Remember to hold n to those receipts as you might be ale to deduct moving expenses fro your taxes.

2. Invest

Put your money to work! The sooner you start investing the longer it has to benefit from the effects of compounding interest. More on investing in a subsequent post.

3. Pay off debt

It's not uncommon to have accrued some debt while in school, particularly credit card debt. Use some of your bonus to pay down this debt. Start with paying the one with highest interest rate first then move to debts with lower interest.

4. Create an Emergency Fund

Surprise expenses happen all the time, no matter how well we try to plan for them. This is why it is important so have a stash in case of an emergency. Keep three to six months living expenses in a separate bank account from the one you use daily. I would also recommend keeping this in a high yield savings account so that you can benefit from the interest.

5. Treat Yourself

While this may have been your first thought, I put this last on the list for a reason. It is very tempting to blow this money on things that you may have wanted for a long time: that designer bag, downpayment on a new car, a shopping spree,a luxury vacation. While there's absolutely nothing wrong with wanting to treat yourself, take care that you don't overindulge. Take yourself (and maybe a friend or two) to a nice dinner to celebrate your new job, go to happy hour, even take yourself shopping. You earned it! but DO NOT blow all your money.



Keep in mind that this is not "free money." You will be paying taxes on it just like everything else. Most companies will explain the terms of your bonus in your contract so make sure you understand the terms. For example, if you quit your job before one year you may have to repay all or a percentage of the bonus. Typically this money isn't completely yours until you've satisfied some conditions or have reached a milestone within the company.