The Best Thing To Do With Your Holiday Bonus


by Dave Clayman, CMT®, C(k)P®, AIF®, CPWA®, Co-Founder and Principal

The holiday bonus: that exciting little extra we receive from employers after a year of hard work. Surely we deserve to splurge on a little something for ourselves with it, right? Well, let’s examine that plan.

First, make sure that taxes were properly withheld from the bonus; otherwise you could be wishing you had some of that money saved come April 15th. Second, think about whether you may have already splurged over the holidays. Many people, my mother included, can get overly generous in December and need to sit down when January’s credit card bill comes in. If you did put a little extra on that credit card, pay down as much of that balance as quickly as possible. Saving the 14-20% interest on outstanding credit balances is like compounding your holiday bonus by saving a little money every month.

Assuming you have passed the test in regard to the suggestions above, now you should examine your savings. (I know, I know, when do we get to the fun part?) Ideally one should have six months’ worth of expenses saved up. Since most people do not have that much set aside, I recommend you take 75% of what may be left of your holiday bonus and put it into savings.

Finally, the fun part…spending some of that bonus on yourself! Take the remainder of your bonus (I know, you may only have enough left to purchase a candy bar at this point) and buy something special, with one caveat: don’t buy something material. Take that money, your favorite person or people, and spend time, along with your money, on an experience with them. If you follow all of my advice and do it right, you’ll be fiscally sound, and that experience with people you care about will make you feel like a million bucks. You might even appreciate your boss more for a day or two — until you return to work, that is.

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