So you just graduated and your new employer has given you a much coveted signing bonus – what are you going to do with it? If you’re a recent college graduate, any signing bonus feels like a windfall that you don’t deserve and you’re not going to think twice about spending it (I spent part of my signing bonus on junk, not enough to regret it but enough to realize I wasted some of it)… but resist the urge! You’re going to want to buy pitchers of Newcastle instead of Pabst Blue Ribbon on Thursdays – resist the urge! Don’t be a stingy bastard though, enjoy the money but here are some things that you might need to spend it on before that first paycheck comes in.
A New Place:
The first major expense of your new life will be a security deposit. Chances are you’ll be renting so you’ll want to research how much of a security deposit landlords are going to want. Sometimes you’ll get lucky and it’ll be a few hundred dollars, sometimes you’ll not be so lucky and it’ll be a month’s rent. Either way, you’ll be paying this before you start work so your signing bonus will have to soften this blow.
Second on the list is getting your junk, whatever you don’t trash because you’re a high roller now, from your dormroom to your bachelor pad. If your company is paying for your move, that’s good, you can buy a few more pitchers. Otherwise, you’ll want to save a little bit more of that beer money to pay for the move. At the bare minimum you’ll need a hundred or so dollars just to rent a deathmobile U-Haul truck.
Third, if you don’t have a car and you think you’ll need one, now’s a good time to start thinking about getting a new ride. Keep that poor college kid mindset and avoid getting a flashy new Mazda 6, go for something reliable and used (certified preowned) as your first car. Don’t get a piece of junk but don’t get something without at least a couple dents. If you’re living in a city, the preexisting dents will keep you sane as you learn no one knows how to parallel park. Use some of the signing bonus to make some sort of downpayment on this car.
Lastly, you want to keep a little of that money in reserve to get your emergency fund started. I’m not saying you take all of it and put it into a high yield savings account  like at FNBO Direct , but you should put a little bit to cover unforseen circumstances.
Some Bad News:
Sorry bring bad news on an otherwise happy topic (newfound money is always happy!), chances are you won’t see your signing bonus until your first paycheck which could be as far away as the end of the month so you might need to lean on a loan from the parents or a credit card to get you there. That… and the bonus won’t be as big as what the offer sheet says… Uncle Sam takes a pretty hefty bite.
Now go buy you and your pals a drink Mr. Moneybags, you deserve it.
Update: Beach Girl makes an excellent point that I missed the first time through , a big chunk of your signing bonus will be taken away by the government in the form of taxes.