How Not to Blow Your Year-End Bonus

400-04138063This guest post is from Kathleen over at Frugal Portland. She is very cool peoples and knowledgable about frugal fun living. Check out her site here and find out more about her. -k

Are you lucky enough to get a holiday bonus this year? I’m in sales, and we do a lot of our billing at the end of the year, so my December paycheck is a bit higher than the rest of the year. It’s like a bonus, in that it’s not at all guaranteed, and it comes as a bump to the wallet every Christmas season.

Some people get bonuses bigger than their paychecks. I knew a guy whose bonus was just a little less than my entire annual salary! He liked to rub that in. Then, the next three months would be filled with indulging every single little luxury he had denied himself the previous nine months. And it would be gone.

Listen, you can do whatever you want with your money (heaven knows, we all do whatever we want!) but I’d like to let you in on a secret. You want to grow your net worth. That’s way more important than any number of fancy dinners.

Here’s how not to blow your year-end bonus:

Measure the Amount

That’s not just looking at the numbers on the check. Figure out what it means to your situation. Is it an extra day’s pay? An extra week? Maybe even a full month? The more money in your bonus, the more strategy you need.

Put it Toward Your Debt

Do you have credit card debt? You absolutely do not get to spend your bonus until you eliminate your credit card debt. It’s not extra money, friend. If you have credit card debt, some giant company is making 10% (or more! It was way worse for me) every single month on your debt. Make your money work for you. Do not work for your money!

Put it Toward Your IRA

Have you maxed out your IRA for 2013 yet? If the answer is yes, pat yourself on the back. Well done! If the answer is no, then do your future self a favor and put all or part of your year-end bonus toward retirement.

Pad Your Savings

I like to have a lot of buffer in my savings, to help when things get expensive. If you can’t keep money in savings, then open a new account – perhaps at a credit union? Credit unions are far better than banks, and you can find one that pays interest. I have my savings in a checking account that pays 2.25% interest.

Treat Yourself (A Little)

If you do not have credit card debt, then put most of your money toward long-term goals, and treat yourself a little. Take yourself out to a movie, or get a pedicure.

Whatever you do, don’t blow it! Use your year-end bonus to get a leg up for 2014, or to catch up from 2013. Don’t use it to get yourself further behind.

About the Author

Kathleen O’Malley is the creator of the personal finance and frugal living blog, Frugal Portland, where she writes about fun, frugal things to do in her hometown of Portland, Oregon as well as ways to make the most of our short time here on the planet. Topics include living simply and having fun on a shoestring.

If you need deeper work around healing your relationship with money or overcoming your blocks and fears, maybe it’s time for some money therapy.   


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