27 Ways to Make the Most of Your Holiday Bonus

Are you expecting a year-end bonus this year? Or maybe you know Grandma always gives cash for Christmas? Either way, you’ve got better things to do with that extra money than just blowing it all.

Any time you get extra cash, it’s important to think about how it could help you get closer to your financial goals. This doesn’t necessarily mean you can’t enjoy some of that unexpected cash windfall. But you should at least think about how part of the bonus money could further your financial future.

Need some ideas? Here are some financial goals you might be working towards, and how you can use that cash bonus to get even closer:

Getting out of debt

If your goal is getting out of debt, you’ve got some obvious options for using that holiday bonus, including:

  • Pay down your smallest debt. If your holiday bonus is big enough to cover one or two of your smaller debts, paying them off entirely can feel great. This option can give you good motivation to keep moving forward with clearing out all of your debt. Plus, it can get rid of a couple of monthly payments, which frees up more cash that you can then put towards larger balances.
  • Pay down your highest-interest debt. Want to really make an impact on your ability to pay off debt? Pay down your highest-interest debt first in a debt avalanche. Even if you can’t pay off the full debt, paying down the debt with the highest interest rate will ultimately save you more money over the long run. Keep hammering away at that balance in the new year and make some serious headway.

Boosting your credit score

Even if you’re not in loads of debt, you may have a lower credit score than you’d like. If you want to boost your credit score, take one of these steps:

  • Pay down credit card balances. Since your debt-to-credit ratio is one of the biggest pieces of your credit score, paying down credit card balances is a quick way to boost your score. For the biggest boost, pay down the credit card that’s closest to its credit limit.
  • Pay bills ahead of time. Paying bills “on time, every time” is absolutely essential to having a great credit score. If you struggle in this area, consider using your bonus to pay a couple of bills ahead. Continue making payments on time after this point, but try to stay a month ahead. If you run into a tight month or run late on paying bills, you won’t get hit with a late fee or a credit score ding.
  • Get on a month-ahead budget. One popular method of budgeting from You Need a Budget entails having a full month’s worth of expenses in your checking account. Basically, you’re always living on the last month’s income. Even if your holiday bonus doesn’t equal a full month’s pay, you can use it to start this smart method of budgeting. The month-ahead budget makes it nearly impossible to miss a bill, so your credit score stays high.

Increasing your savings

Looking to boost your savings rate or tuck money away for some specific goal? Try one of these options:

  • Save for something specific. Have something in mind that you’re actively saving for? Your holiday bonus or Christmas cash can be a big boost to this fund. Whether you’re saving for a house, a new car, or a vacation, putting your bonus towards something big is always a good option.
  • Put money into your emergency fund. If you’re actively working to get out of debt, you’ll still want a thousand dollars or more in a savings account. If you’re debt-free, or close to it, you’ll want to aim for having three to six months’ worth of expenses in a savings account. Just in case the worst happens. Put your cash towards starting or building up this fund, and you can’t go wrong.
  • Start a new, generic savings account. If you’ve not been great at saving in the past, consider just starting a new, free savings account that you can continue contributing to throughout the next year. Sometimes having a bit already saved can be motivation enough to sock away even more money.

Saving for retirement

If your main financial focus is investing for retirement, try one of these options with your bonus:

  • Start an IRA. Are you already contributing heavily to your company’s 401(k) plan? Use your holiday bonus to start a traditional or Roth IRA, depending on your financial situation.
  • Contribute to your Health Savings Account. If you’re already maxing out on retirement savings, consider adding to a Health Savings Account (if you’re eligible). Since this money can also grow tax-free indefinitely, it can serve as a bonus retirement savings. This is especially useful if you’re within a few years of retirement.
  • Try a taxable investment account. Want to try your hand at making investment decisions when you have more choices? Consider opening a taxable investment account using a tool like Betterment. You don’t want to put too much money into a taxable account until you’re maxing out your tax-advantages options. But a bonus can be a good start to this type of investment.

Furthering your career

Got some serious career goals for 2017? You could use your holiday bonus to move toward them.

  • Remodel your home office. Do you work from home or often bring work home for evenings and weekends? Having an appropriate space for working can help you be more productive. Consider using your bonus for a home office remodel. Don’t go overboard, but focus on basics like technology you need (a scanner, printer, etc.) and a comfortable, ergonomic, quiet work space.
  • Take a course. Boosting your skills and knowledge is always a great way to further your career. Try using your bonus to take a college course or an online class designed to enhance your current skillset or add completely new skills to your repertoire.
  • Pay for a conference, membership, or subscription. Networking is always a great way to further your career, and you can do that at conferences and conventions. Check out some great ones in your area. Or pay for a subscription to a professional league or a membership to your local Chamber of Commerce. These are all great ways to meet new people who can help you in your career or be valuable contacts in the future.
  • Upgrade your work wardrobe. If you’re really looking to move up in your career, you may need to look more professional to do so. Splurge on a new suit or an uber-professional capsule wardrobe that will really wow the boss, colleagues, and clients when you get back to work after the holidays.

Securing your family

Maybe there are a few things you’ve been putting off, but that need to be done for the future security of your family. Consider these options for your holiday cash:

  • Pay a lawyer to draw up a will. If you don’t already have a will, that’s a must-have. Get with a local lawyer to draw one up, especially if you have children who would need to be cared for if something happened to you. It’s never fun to think about dying, but creating your will is absolutely a must-do.
  • Get liability insurance. An umbrella liability insurance policy can cover gaps left by your homeowner’s and/or car insurance. These policies aren’t necessary for everyone, but can offer great protection for people who need them. Consider putting a big payment towards liability insurance premiums with your cash bonus.
  • Buy a term life insurance policy. Term life insurance is the smartest option for most consumers, especially younger people who will likely only need insurance for a couple of decades. Do your research on the type of policy that will work best for your particular needs, and then pay a year’s premiums in advance with your bonus.
  • Increase the value of your home. If you’re like many homeowners, your home is your biggest asset. You can get some personal satisfaction and make a smart financial choice by boosting your home’s value. Kitchen and bathroom remodels typically give the best bang for your buck, but you’ll first want to tackle any outstanding maintenance issues that could cause your home’s value to tank if not fixed.

Starting some New Year’s Resolutions

Maybe it’s worthwhile for you to spend that money meeting goals in other areas of your life, such as fitness or intellectual development. If you’ve got some non-financial New Year’s Resolutions this year, don’t be afraid to advance them with your bonus. Need some ideas?

  • Buy a gym membership or home gym equipment. Want to get in better shape this year? Use your bonus to prepay for a gym membership. You’re more likely to go if you’ve already paid for it! Or buy some basic equipment to set up your own gym at home, making getting in shape even more convenient.
  • Purchase an e-reader and several books on your to-read list. If you’d prefer to strengthen your mind this year, consider buying a slim e-reader like the Nook or Amazon Kindle. Not everyone loves them, but they’re a great option to keep in your purse or briefcase for those brief moments you get to read throughout the day. If you go this route, buy a few books you’ve been wanting to read so you’re never lacking for materials.
  • Get a subscription to a magazine or newspaper that interests you. Again, you can boost your personal intellectual development with some solid reading. Consider using part of your bonus for an interesting magazine or newspaper. If nothing else, this will help you be more interesting at cocktail parties this year.

Boosting your motivation

Sometimes it’s okay to just splurge. In fact, if you’ve used your income wisely all year — living frugally and paying off debt or investing — now might be the best time to splurge. This can, after all, boost your motivation to keep making great financial choices through 2017. Here are some splurge ideas:

  • Develop a new hobby. Having hobbies is a great way to decrease your stress level and keep you interested in life when work gets boring and financial progress seems slow. Use your bonus to buy supplies for a new hobby, or find a local class you can take to develop a new skill to hone throughout the coming year.
  • Redecorate your home. If you’re bored with your old bedspread and curtains, take some of your bonus to redecorate. New paint and linens aren’t all that expensive, and can be a great way to start the year with a fresh outlook.
  • Go out on the town. For smaller bonuses, or if you just want to use part of it, take your spouse or family out for a nice dinner. To really make the most of it, splurge on a restaurant you wouldn’t normally pick. Try something new, and make it a memorable experience.
  • Take a vacation. One of the best ways to boost your overall happiness is through experiences rather than “stuff.” Whether you have a $1,000 bonus or a $10,000 bonus, consider spending some of it on a vacation. Plan a summertime, weeklong cruise, or take a weekend-long staycation to get to know your hometown.
  • Relax. Maybe that bonus came only after a very stressful work year. If you’re all tied up in knots, use some of that money to do what relaxes you most, whether that’s a day at the spa or a night out with friends. Decreasing your stress level will only serve to make you more focused and productive after the holiday season.

Decide what’s best for you and your family, and enjoy whatever you decide to do with the money!

Will you be getting a bonus this year? How do you plan to utilize it?


Topics: Smart Spending

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