Let’s Talk Money: It’s Bonus Season

With the end of the working year comes the bad (a mad dash to hit your hours) and the good (bonus time).

If you’re fortunate enough to work for a firm or organization that pays bonuses, you may find yourself with anywhere from a few hundred to tens of thousands of extra dollars lining your pockets.  Where you fall on that scale will probably impact what you do with your windfall, but here’s how I suggest spending that money:

1)      Treat Yo Self: There’s no harm in using a little bit of your hard-earned cash on a gift for yourself. But don’t blow it just to blow it – buy something you really want.

2)      Pay Down Debt: If you’re paying off student loan or other debt, take advantage of a windfall to pay some extra on the principal balance. (For more advice on this, see my earlier post explaining how I paid off six figures of debt in five years here.)

3)      Save: Bump up your contribution to your retirement accounts, save to a short-term savings account, or invest in the market.

4)      Spread the wealth: Earmark some of your funds for the charity of your choice.

How much you devote to each of these categories is obviously up to you, but I suggest directing at least 75% of your bonus to paying down debt and/or savings.

What you should avoid at all costs is using the money for lifestyle creep, meaning don’t assume you will always get a bonus (even if, historically, you have), and don’t treat the bonus as part of your monthly income. Your salary is your salary. Your salary is not your salary + bonus.  Live on what you get paid in your regular earnings and treat your bonus like the awesome gift it is.

Pic Credit: Fabian Blank (via Unsplash)