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)