It’s that time of the year again! You know, performance reviews and bonus talk time! As the meeting requests start to trickle in and the closed door conversations with your boss or team come to an end, you may find yourself wondering what you should do with all your new cash (in some instances, Christmas bonuses, money you received over the holiday, or cash from your tax return).

Whether your performance bonus or holiday cash be a total $500 or $5,000, it’s important to have a solid plan in place for this money before it hits your account. It’s time to start thinking in terms of “what will give me the best possible bang for my buck” in order to help figure out what your next move should be. Here are just a few ideas to consider: 

1.) Pay down debt 

I know what you’re thinking and yes throwing all of your hard earned cash back into an acquired debt is NOT fun, but remember that any stride towards becoming debt free is a WIN! Consider this, would you rather pay off a debt you already have or create a new one? For example, let’s say you’re thinking of buying something that you’ve been wanting for quiet a long time. If that item is $1,500, and you only have the $1,000 bonus and $200 saved, don’t plan on going into more debt by putting the remaining $300.00 on a credit card. It’s simple, if you don’t have it don’t spend it. Work with what you have and prioritize your spending, you have to get out of debt before anything else can truly feel meaningful. It may feel like your bonus won’t make a huge impact on your debt now but trust me, in the long run it will pay off. That extra payment towards your car, student loan, credit card, medical bill, mortgage, etc will be one less payment down the road.



2.) Save, Save, Save!!!

If you’re fortunate enough to have no debt that needs addressing then I encourage you to save your bonus! Some companies allow you to apply your bonus directly towards your 401k account. If you don’t have a 401k, then consider your IRA or sending the cash directly to your savings account. Whatever kind of account you have, one idea that never hurts is to simply save your bonus for your future. If there are any big events or major life changes in your near future, you can set aside money for that. Whether it be to build your emergency fund, save for a new car, save for a nice vacation, for a wedding, for a new child, it never hurts to save!

3.) Divide and Conquer 

If you can’t fathom applying your entire bonus into your debt or a savings account, then I encourage you to split up your bonus. Commit a percentage towards paying off debt, another towards saving, and a small amount to splurging. If you can’t fight the temptation of spending it all, this approach may be your best bet. If you have debt, allocate the highest percentage towards making an additional payment(s), then make sure you pay yourself by setting aside a percentage to save (401k, savings account, IRA, investments, etc), and then have a little money for fun!



Overall, I recommend that you don’t get reckless and go on a shopping spree with all your money. I know you worked hard and I’m sure you deserve to splurge, but moderation is key! I believe that what you truly deserve is to be debt free, stress frees, and have a financial cushion for your future! Have a plan for your upcoming bonus and create that plan before you spend a dime of your hard earned cash. Check yourself before you reck yourself!

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Written by Carmen

Creator of www.makerealcents.com, a blog dedicated to all things personal finance and money. Crushed over 38k in debt in less than 18 months and I’m on a mission to help others achieve financial freedom.