Five Strategies to Use a Bonus or Raise

December 5, 2019 | John R. Gilliland

John R. Gilliland, Financial Advisor, Morgan Stanley Wealth Management

Many companies provide some form of incentive compensation as part of their overall compensation package. In fact, 85% of U.S.-based companies paid out bonuses in 2018, according to a recent survey by WorldatWork, an association of human resource professionals.1

If you’re fortunate to see a boost in your paycheck—whether it’s through a bonus, raise or promotion—it may be very tempting to spend this extra cash, but using your bonus on long-term, big picture goals may lead to greater happiness in the long run.

Here are five strategies to put your money to work for you now, so you can potentially reap the rewards down the road.

1. Pay down part or all debt

If you have debt, such as student loans, car loans or credit card debt, a bonus can be a great way to tackle it aggressively. And if the interest rate on your debt is high, make this a top priority. The money you pay in interest can cost you thousands over time.

2. Boost your investment in your 401(k) and max out other retirement accounts

Hopefully, you’re already contributing to your company’s 401(k) retirement account and taking full advantage of any available company match. When you receive a bonus or an increase to your salary, consider increasing your contribution, since the more money you set aside today, the better off you’ll be in the long run, helped by the power of tax-deferred growth potential.

3. Contribute to a savings or investment plan

If your current financial situation is solid and your debt is under control, consider investing your newfound cash in a savings or investment plan that is earmarked for a long-term goal, like buying a home, but is also available for any short-term emergencies. Resist the temptation to invest in a few hot stocks and instead follow a long-term investment strategy.

4. Save through an education savings plan, such as a 529 plan or Coverdell ESA

The average cost of tuition and fees at a private college is $35,830 for the 2018-2019 school year, according to the College Board.2 This expense has continued to rise every year.

If one of your long-term goals is to send your children or grandchildren to college, consider allocating some of your new funds towards a 529 Plan and a Coverdell Education Savings Account—both can be excellent college savings vehicles because they are both tax-free when used for college or trade school. There are important differences between the two—specifically age, income and contribution limits.

5. Invest in yourself

If all your necessities are covered and your long-term goals are on track, think about using some of your enhanced compensation to accomplish an important short-term goal. For instance, you may want to consider investing in a gym membership or a wellness group.

Making the Most of Your Money

Earning and receiving a bonus, raise or promotion is very satisfying, and can help you advance your financial well-being. Take time to gain ideas and guidance about how the money can help you reach your future goals in the context of a comprehensive wealth management strategy.  


1 Source: WorldatWork 2018-2019 Salary Budget Survey, July 2018.

2 Source: The College Board.


Article by Morgan Stanley and provided courtesy of Morgan Stanley Financial Advisor.

John R. Gilliland is a Financial Advisor in Des Moines, IA branch at Morgan Stanley Smith Barney LLC (“Morgan Stanley”). He can be reached by email at or by telephone at 515-283-7035. His team website is

This article has been prepared for informational purposes only. The information and data in the article has been obtained from sources outside of Morgan Stanley. Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of the information or data from sources outside of Morgan Stanley. It does not provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this article may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.

The 529 Plan Program Disclosure contains more information on investment options, risk factors, fees and expenses, and potential tax consequences. Investors can obtain a 529 Plan Program Disclosure from their Financial Advisor and should read it carefully before investing.

Investments are subject to market risk and may fluctuate in value. Before investing, investors should consider whether tax or other benefits are only available for investments in the investor’s home-state 529 college savings plan.

John R. Gilliland may only transact business, follow-up with individualized responses, or render personalized investment advice for compensation, in states where he is registered or excluded or exempted from registration, © 2019 Morgan Stanley Smith Barney LLC.  Member SIPC. CRC 2467455 03/2019