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Spend or Save: What to Do with Holiday Gift or Bonus Cash

Personal Insights

It is bonus season! If you’re lucky enough to even ask yourself the question, you may soon be wondering if you should spend or save. More than half of American employers gave their employees bonuses in recent past holiday seasons. If you are expecting a bonus this year, financial planners typically recommend using 80 percent of your holiday bonus for “serious money”, using it to pay off debt and increase savings and top off retirement funds, and the remaining 20 percent to spend however you wish.

A recent survey of American businesses found that the majority of employers spread holiday cheer by giving out bonus checks. If you are expecting an end-of-year or holiday bonus, it is in your best interest to make a well thought out plan for the money before you are able to actually get your hands on it. It is easy to think of all the reasons to use it for your “fun money.” However, it is important to consider how you are dedicated to building wealth. Do you know where to begin?

What to Do With your Holiday Bonus?

Many people wonder where their money can make the most impact. Hopefully you are at a place to already make regular payments towards any debt and are without extenuating circumstances, like an expected end-of-year medical bill or other urgent charges to which you have already committed any extra funds to. Be smart with your bonus! You can speak with a financial advisor, but after reading the following you most likely already know where you should put your bonus towards.

You’re safer to spend your bonus however you want when each of these are fulfilled:

  • You don’t have credit-card or other high interest debt,
  • You have at least 6 months’ worth of expenses in an emergency fund,
  • Your retirement fund is maxed out for the year,
  • You don’t have any savings goals such as a car, vacation, house, or college tuition.

You should put your bonus towards other needs:

  • If you are in any kind of outstanding debt,
  • If you are not properly equipped with an emergency fund,
  • If you should contribute more to your retirement fund,
  • If you have important savings goals to put it towards.

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