Unexpected money is always exciting. Of course most of us expect the bonuses that have become such a traditional part of the holidays. While a nice big turkey may have been enough for the Cratchets’ for Christmas I would like something a bit more substantial.
What should you do if your bonus comes through like it did for a number of families in Illinois (the bonus were based on the number of years of employment and came from the owners’ sale out to new owners).
It is tempting to spend any “found” money from raises to bonuses to tax refunds but there are so many better ways to enjoy the fruit of your labor.
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1. Pay off revolving credit and debts so you don’t have to stress over those payments.
2. Put some of it in an emergency savings account (be working towards three to six months worth of expenses).
3. Set aside about 1/3 for any additional taxes that may come from the bonus especially when it is unusually large.
4. Indulge with around 10 to 25% of the bonus so you don’t feel like you are deprived and become overwhelmed with the urge to spend it all out of spite.
There is nothing wrong with spending part of the bonus that you receive but you may want to reserve the largest portion for savings and debt reduction to give you a long term peace of mind.