If you received a holiday or year-end bonus, it can be tempting to blow the money on the big screen TV you didn’t get for Christmas or take a spur-of-the-moment trip. Instead of wasting the money, use it wisely to get a leg up on your finances in the new year. Here are five ways to spend your holiday bonus.
Pay Holiday Expenses: Use the money to pay for all those Christmas gifts you just bought. That Wii won’t be as fun if you’re still paying for it in March. Instead, write the check to the credit cards now so you don’t be tempted to use the money another way.
Pay Down Debt: If you have enough to cover your holiday expenses and then some, then use the leftover money to pay down whatever debt you have remaining. If the amount will cover a smaller debt totally, then just pay it off. Even if it’s a lower rate than some other debts, you’ll get a mental boost from knowing that debt is gone. If it’s not enough to cover any single debt in full, then pay it towards the highest rate debt. Seeing the sizable dent it makes will encourage you to continue working down the debt.
Build Your Emergency Fund: If you don’t have debt, then it’s time to build an emergency fund. Experts recommend three to six months salary, but even one month’s salary will help if you have a sudden leak roof, family illness, or broken down car.
Invest The Money: If you don’t have debt and already have a sizable emergency fund, then invest the money. Make a year-end contribution to your IRA or open one if you don’t have one. You have until April 15 to contribute for the prior year, so it’s never to late to invest your bonus money.
Have a Nice Dinner: If you spent your holidays with family and worked your butt off to make it nice for everyone, take a little bit of the money and go out for a nice dinner with your spouse. Leave the kids at home. Leave the financial talk at home. I know it’s not saving money, but sometimes we need to splurge just a little bit.
I know these uses for your bonus aren’t as fun as a snow weekend, but they’re more fun than paying credit card debt for the rest of your life.