After a hard and productive year of work many of you likely find yourself in line to receive a holiday bonus. Now, the question you have to answer for yourself is: how do I use this bonus? Deciding on how you should spend your bonus depends heavily on your goals and is much more of an art than a science. However, here are a few ways that we think you should consider.
1. Pay down debt: A bonus is a great way to accelerate paying off your debt more rapidly than your budget typically allows. If you pay down a credit card with a 20% interest rate you are instantly getting a 20% return on this allocation of your bonus. Using some of your holiday bonus to pay down debt is a great way to use this extra influx of cash to position yourself for the future.
2. Donate to your favorite charity and save on taxes: Do you have a favorite charity that supports a cause you are passionate about? If so, donating part of your holiday bonus may be a way to fulfill your personal goals as well as gain some fiscal benefit. Charitable contributions are deductible on tax returns, so supporting a cause you are passionate about is a great way to reduce taxes as well as back something you care about.
3. Increase the value of your house: Using some of your holiday bonus on that remodel or add on you have been waiting to do can be a great allocation of your bonus. Not only are you immediately increasing your standard of living, you are increasing the value of what could likely be your most valuable asset.
4. Spend some on yourself: It is important to take some of your bonus and reward yourself for your year of hard work. Balance is a critical aspect of every facet of life, including your finances. This doesn’t have to be extravagant, but take some time and money to celebrate what you have accomplished.
These are just a few of the many ways that you can choose to spend your bonus in a beneficial and fiscally responsible way. Hope you enjoy!