Three Smart Ways to Spend Your Year-End Bonus

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The end of the calendar year is an exciting time. Holiday vacations, office parties, and – of course – year-end bonus checks. But are you making the most of your year-end bonus?


Nicole Mayer, AIF® CDFA™ of RPG- Life Transition Specialists, a holistic wealth management firm in Chicago, advises her clients to be smart about how they use their bonus checks. “It can be very tempting to take the supplemental income and buy your kids some extra gifts,” says Mayer. “But you could be penalizing yourself in the long run if you do that. There are some very smart ways to use this money which can help you earn even more in the long run.”


Below Nicole Mayer shares the three smartest ways to spend your end-of-year bonus.

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  1. Contribute to your Retirement Fund. This is an excellent use of your year-end bonus for a couple reasons. First, as much as a quarter of year-end bonuses are often taxed, which is offset if you put those funds into a 401(k) or IRA. Plus, if your employer matches year-end bonus contributions, you could immediately grow your bonus by several hundreds of dollars.
  2. Pay Off a High-Balance Credit Card. There may be no greater gift to give your family this holiday than a debt-free start to 2015. The average American is paying approximately 13 percent interest on their credit card balances. A large payment toward your credit card could literally save you thousands over the next couple years.
  3. Leverage your Bonus with the Bank. A lump sum bonus check often will put you in the position to negotiate better savings and checking account rates with your bank. Use this opportunity to do some research on your fees and rates of return to ensure you’re getting the biggest bang for your buck.


It can be easy to make poor decisions with year-end bonuses, but doing so could have ramifications that last throughout the New Year. “Even if you’re only getting a couple hundred dollars, you have the opportunity to turn that into a couple thousand dollars if you’re smart,” says Mayer. “And, as always, if you’re unsure about the best move for you, talk to a financial advisor.”