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How to Spend Your Holiday Bonus

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If you get a little extra cash in your paycheck from a holiday or year-end bonus, stretch it as far as you can in a way that will help you over the long term and still afford you some fun. Receiving unexpected money is a great way to get ahead financially. Whether you get 100 dollars or 1,000, there are many ways to put it to good use. So how are you going to spend your holiday bonus?


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  • SAVE, SAVE, SAVE: The first thing you should do is set some money aside for your savings account. It’s important to have an emergency fund set up in case you lose your job, have unexpected car repairs, medical bills, or other unanticipated expenses or life events. Experts recommend having 3 months’ worth of bills built up in your savings. That could be a large number so don’t fret if you’re not quite there, but contribute as much as you can to your account. I would recommend depositing money into whichever account earns the highest interest to make a little extra on your bonus.
  • Pay down debt: Take a portion of that money and pay down some of your highest-interest rate loans. Credit cards are among the highest – with interest rates running upwards of 20 percent. Personal loans also have high interest rates. It may not sound like a fun way to spend your bonus; however, it is beneficial to start chipping away at debt as soon as you’re able. The money you save by avoiding steep interest charges will make your efforts well worth it in the long run.
  • Save for retirement: Consider making a contribution to a tax-deferred account such as a 401(k) or educational plan. Unfortunately, bonus checks are taxable, but one way to avoid paying unnecessary taxes while maximizing your earnings is to put as much into retirement or education as you can afford.
  • Donate it: By investing in the community, local businesses can thrive. You can also help your struggling neighbors or local animal shelter. A charitable donation not only makes you feel good about supporting significant causes, but you can write most donations off on your taxes. This type of donation can help relieve your tax burden at the end of the year while also benefiting your community.
  • Treat yourself: Regardless of how you choose to spend the bulk of your bonus, take 10 percent and spend it on something fun for yourself. You work hard all year round to earn it, so treat yourself. Buying something special is a good way to start the New Year. Make sure it’s something that makes you happy and hopefully it will motivate you to do your best work, so you can look forward to your bonus the following year.


While you wait for your bonus check to arrive, make a plan. Decide how you are going to allocate the extra funds. That way, you will be less tempted to use it in less productive ways when you get the check because you already know what you’re doing with it.

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About Katie Maguire Bagnall

Katie Maguire Bagnall is a Member Service Consultant in VSECU's Williston Office. She has worked for VSECU since 2011. Her favorite part of her position is helping Vermonters organize their finances. She lives in Essex with her husband, her 1-year-old son Brady, and her dog Rubi.
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