by TAYLOR J KOVAR – CHIEF EXECUTIVE OFFICER
CERTIFIED FINANCIAL PLANNER™
Hey Taylor – I get a bonus in late November each year and I’m trying to make a plan before the money actually hits my account. That way I’ll hopefully put it toward something useful. Any suggestions?
Hey Martin – Great work getting a head start on the planning! You’re already doing better than most bonus recipients. I’ve got three options for you—none of them are particularly exciting, but they’re all savvy choices and hopefully one of them will have enough appeal.
–1. Boost your emergency fund. One of the most prudent ways to use your holiday bonus is to strengthen your emergency fund. That should be your goal if you don’t already have three to six months’ worth of living expenses saved up. If you already have a solid emergency fund, there’s nothing wrong with allocating your bonus in that direction and then moving the money around later. Most people either don’t have emergency savings or lie to themselves about how much they need, so I always urge people to get a healthy amount of capital in that fund. You don’t have to set aside your full bonus, but at least consider saving a portion for those unexpected expenses.
–2. Invest in yourself. Investing in the stock market or your IRA is a fine option for bonus money. However, when I say invest in yourself, I mean put some cash toward personal development. This could be enrolling in a course, attending a workshop, or getting certified in a way that will progress your career prospects. You could do something that isn’t directly related to your career, like learn a new language or delve into coding. Whatever you choose, I’m sure you’ll be happy with the decision. It’s very rare that someone puts effort into obtaining a new skill and ends up regretting it. If you’re looking for a promotion, putting your bonus toward professional development is the kind of thing employers take notice of.
–3. Make a meaningful contribution. The holiday season is a time of giving, so what better way to put your good fortune to use? Donating a portion of your bonus to charities or non-profits can create a positive impact in your community, help with your tax situation, and generally make you feel better about yourself. I’m a huge proponent of tithing and charity, and I know it’s not always easy for people to give money when it costs so much just to support a family. With a bonus that makes you feel a little extra flush, you can put that money toward a cause you believe in without feeling like you’ve spread your finances too thin.
How you spend your bonus can set the tone for the upcoming year. Fortifying your financial security, investing in your personal growth, or giving back to your community are all good ways to close out 2024 and launch into 2025. Happy spending!
