What to do with your money if you get a bonus?

If your company has given you a bonus following good performance in the past year, investment should be favored to build the best solid assets for the long term.

Business circles are used for bonuses, particularly distributed among banks and consulting firms. But increasingly, this form of additional remuneration, so widespread in the United States, is spreading to other areas of France.

If you are lucky with bonuses, investments should be favored with the objective of building solid assets over time, following the professional performance achieved in the previous year.

At first, avoid wasting everything on inevitable purchases, “even if we have the right to treat ourselves and dedicate 10 to 25% of our bonus to one or more purchases”, estimates Félix Riviere, investment manager of Goodwest, savings solutions. On the platform, BFM Business.

Also avoid letting your bonus sit in a checking account. Otherwise, it is gradually eaten away by inflation.

Build prudent savings

“As a priority, we must build or reconstitute our safety cushion, that is to make careful savings”, underlines Félix Riviere.

The idea is to be able to cover one or more unexpected expenses, such as repairing your vehicle after a collision. It is up to you to assess the thickness of the mattress you need, it will definitely be higher if you have one or more dependent children.

Felix Riviere clarifies that it is generally advisable to have “three to six months of income divided between current accounts, savings accounts and possibly Euro life insurance funds”.

Precautionary savings should be accessible and therefore should be in liquid investments, viz a bookletCompletely tax free envelope, remunerated at 3% today

Anticipate your future taxes

Then, it may be wise to assume your future tax amount is mechanically inflated by the pocketed bonus.

“A bonus is a salary, which increases taxable income,” asserts Félix Riviere. So it is better to “save a part of the bonus to be able to pay this additional tax burden”.

It is a later year, so in 2025, the employee will be taxed on their bonus received in 2024. To assess the surplus to be paid to the tax authorities, simply “multiply the amount of this bonus by its marginal bracket. of taxation”, explains Felix Riviere.

To ensure you dedicate a portion of your bonus to paying your taxes, Term Account (CAT) is a solution. This envelope often allows you to benefit from a more attractive return than Leverate A. It is a safe investment, the duration of which, fixed when the account is opened, varies from a few months to several quarters or even years.

Above all, savings stored in term accounts are blocked. The envelope thus represents “a real alternative” to not being tempted by the cost, convincing Félix Riviere that the money is not available. In the event of withdrawal before the maturity date provided in the contract, the saver faces a penalty.

Ways to reduce debt

You can also dedicate part of your bonus Reduce your debtIf you have

“This can be interest, especially when you have high debt, when you have consumer loans or student loans, or even real estate loans tied to the acquisition of a principal residence,” explains Felix Riviere.

But what is expensive debt? According to a Goodwest expert, it is a credit with an interest rate of 4-5% or more. “In any case it’s hard to find the same level of long-term return with your savings, at least not without taking some risk,” he adds.

Invest your savings for long term

Finally, you can put your remaining bonuses into envelopes that allow your money to grow over the long term.

“Life insurance Can be considered the foundation of a long-term heritage strategy. It offers benefits in terms of taxation and diversification,” notes Félix Riviere.

This investment offers different investment vehicles between its Euro Fund and its account units with guaranteed capital that allows investment in different types of financial securities (shares, bonds, money market, etc.). In addition, life insurance offers a partial tax exemption after an eight-year contract, with a recovery of 4,600 euros for an individual and 9,200 euros for a couple thanks to the application of tax reductions on earnings.

Apart from life insurance, Stock Savings Scheme (PEA) allows you to invest in shares of European companies. A particularly risky investment in the short term, but potentially very profitable in the long term. Earnings withdrawn from PEA after five years of the plan are fully tax free.

to end, Retirement Savings Plan (PER) presents “a double benefit,” according to Felix Riviere.

“PER also allows you to invest a part of your bonus to grow in the long term so as to neutralize part of the additional tax burden (this bonus, attached to the editor’s note), to the extent that every euro is paid in PER. Deduction from taxable income “, recalls the Goodwest manager.

While PER has many advantages, you should keep in mind that this investment is the one that allows you to grow your retirement savings the most. Savings in this envelope are therefore blocked until the end of your professional career, even if there are cases of early release (disability, death, excessive debt, acquisition of principal residence, etc.).

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