The Best Way to Spend a Year-End Bonus

What's the best way to spend a year-end bonus? Here's what Yahoo suggests:

One of the best things you can do is to put that money toward maxing out your 401(k). This year you can contribute up to $15,500. If you're over 50, you can contribute $20,500.

This way you won't be penalized by Uncle Sam for that holiday bonus. If you have a mortgage, you may want to consider paying down more of your principle. This will reduce the amount of interest you end up paying over the life of the loan.

And finally, it's a good idea to check your emergency fund. Make sure you have at least 3 to 6 months worth of living expenses. If you need to pad your fund, consider a high-yield savings or money market account.

Ok, so what if you already max out your 401k, don't have a mortgage, and have an emergency fund? And besides, is this really the best way to spend a bonus? After all, we know that there's a better option than simply maxing out your 401k (401k total match, Roth IRA, 401k max.)

Anyway, here's what I did with my bonus this year: I saved it. Yep, all of it. We're thinking of buying a new home and we either want to pay cash for it or (at least) have so much available that we'll be able to pay it off in a few years at most. So we're saving for that new home and that's where the bonus went.

How about you? Did you get a bonus (or do you think you'll get one)? If so, what did you do with it?

Comments

[Susan]

I convert it to paper cash and then put it on the bed and roll around in it giggling with glee the whole time.

[Anitra]

We're getting a big bonus in January - two bonuses to my husband, plus an extra paycheck for me, mean we're getting twice as much income as a normal month.

We're putting it all towards one of our student loans; it will cover about 1/3 of the current principal, and we plan to have that loan and another smaller one paid off by the end of the year. If the loans were all paid off, we'd be putting it towards the mortgage instead.

[Brad]

I usually put my bonuses directly towards paying off credit card debt. Didn't get a "Christmas" bonus, but instead the last of the quarterly bonuses my company offers. Right now I'm playing catch up after paying for both Christmas and birthday gifts, and the car payment all in one week. After I get my next paycheck I'll be putting a bunch towards credit cards, hopefully the entirety of my bonus! Can't wait till its all paid off and I can do something I want with my bonuses, rather than paying off things I already stupidly bought in the first place!

[rdub98]

I paid off mine and my wife's credit cards. It gave me a good feeling to pay them off, but felt a little down that I couldn't buy myself something nice with it.

[Kevin]

I wish I had this problem. All I get is a Honeybaked Ham.

[Phil M]

I'll get my bonus in late March, but it's going right into some high interest school loans and credit cards; I want this debt gone!

[mjmcinto]

My wife got notified yesterday that she'll be getting a decent bonus on the 31st. Since this was totally unexpected, I haven't really worked it into the budget. I currently have an emergency fund with 5.6 months worth of expenses in it (and I'm not adding any more, just letting the interest accumulate), which I think is plenty adequate since we are DINKs. We don't have any credit card debt (other than the monthly expenses which get paid off monthly), so the only debt we have is student loans, a car loan that has an interest rate lower than I can make in my savings account, and our mortgage. We've decided we want to have some fun w/the money, but still be responsible. So what we're going to do is buy a roomba (we're both geeks, so this is our fun purchase), a freezer to put in the garage to hold more items so when meat goes on sale (like turkeys for $.69/lb) we can load up and still have room for the "normal" stuff, and then we'll be responsible and put the rest towards the student loans. We decided on the student loans b/c there's 6 of them, and the largest is only ~1600, so seeing that many loans out there for such a little amount is starting to annoy me. Plus I'm already paying an additional several hundred more a month towards our mortgage, so I've decided any windfalls (bonuses, tax refunds, etc) will go towards paying off the student loans (which we might be able to accomplish w/in a year), and then they can go towards the mortgage.

[Josh]

Bonus? HAHAHAHA!!!!

[unequivocal]

Our parents helped us with the down payment for our home. So we paid them back with the bonus.

[Josh]

Bonus? HAHAHAHA!!!!

[Me]

My husband and I manged to finally come to a comfortable happy place in our marital bliss with our bonuses.

For years I was the only one that got a bonus. I would have us do something responsible with it. Sometimes we would purchase something for our home, other times it was split - in the savings and the rest for fun purchases.

Then we found ourselves in a place where he had the bonus and I did not. He felt the most responsible use for it was purchasing more musical equipment that he didn't need.

Finally I realized - Although I did responsible things with it, I never really asked him for his "input". So now when he gets a bonus, he asks me for input and considers it. Sometimes he does it, most of the time he does not.

It is agreed that if we are found in a position that only one of us is working and the other is not, the bonus will be viewed as ours.

I have to say, after finding a "happy place" with this arrangement when your husband decids to go out an buy you an expensive music box because he wants to spoil you, the present means more. It wasn't forced.

[Foobarista]

When I got mine in midsummer, it went to topping out the 401K. Half the rest went to taxes. What was left was saved.

[brent]

you're going to love my answer: using it to pay off credit card debt.

btw, this business of regurgitating the nonsenseness of the christmas story as part of your blog: you just lost a reader.