What to Do with Your Bonus

23 December 2021
Michele Ferrario
Co-founder and CEO

For many of us, bonus season sparks big ideas of purchasing a new watch, going on vacation, or buying a new car.

I admit that I enjoy all of the above and truly believe that rewarding myself for a job well-done can help create a habit of continuing to excel. But, I still maintain that it's crucial to spend intentionally and to have a plan to make sure that you put yourself first.

"Putting yourself first" can mean many things. For example, you could buy something really nice, further your education, or take a course on a topic you were always interested in. But putting yourself first also means taking care of future you.

So, today, I want to focus on a few ways you can put yourself first. And it might not be the first thing you’d normally think about.

Use your bonus to pay off bad debt

“A man in debt is so far a slave.” - Ralph Waldo Emerson

To start, you should use a portion of your bonus to get rid of any lingering credit card debt that you might have. Even credit card debt can stack up and seriously hurt your financial health. With many credit cards charging upwards of 15% in interest, it makes sense to get rid of any balances as quickly as you can.

Use your bonus to stock up your emergency fund

Traditional advice says to have between 3 and 6 months of cash saved up for any emergency that life might throw at you. This could be anything from being laid off from work to the broken refrigerator that needs repair or replacement.

Having enough cash to pay for these unforeseen events will alleviate the financial stress of disasters or mishaps. Trust me, you’ll thank yourself later for having an emergency fund when you need to pay for a medical bill or repair charge.

So, make sure to use a portion of your bonus to build or top up your emergency fund. You’ll also want to keep this in a very liquid account, such as a simple savings account or a cash management fund, like StashAway Simple™. This is not money you want to be investing, as you might need to tap into it at just a moment’s notice.

Learn how to build an emergency fund.

Use your bonus to boost your retirement savings

Remember how I said you should put yourself first? Take that hard-earned cash, and make it work for future you. Bonus season is one of the best times of the year to add to your retirement goals because that lump sum can accelerate compound interest that much more.

When selecting a retirement plan, don’t fall into a generic investment product. Instead, take the time to find one that reflects your personal timeline and risk preferences. Ensure your investments align with your risk level because if you're overly aggressive in your accounts, you could find yourself losing sleep over it.

Retirement is a long-term game that includes the ups and downs of the market but rewards you for staying invested.

Invest for Your Retirement ⟶

Put your bonus towards your big life goals

Your debts are paid off, you’re comfortable with your emergency fund, and you’ve contributed a little more to your retirement plan. So now what?

If you still have more money to allocate, why not craft a plan and chase the other goals you’ve had in mind? Whether saving for a downpayment towards an apartment or starting your own business, these goals take significant amounts of money. This is a great time to create an action plan to achieve them, starting with a little extra cash to give you that initial push.

Use your bonus to treat yourself and have fun

So, the first four topics may not have been the most fun. But receiving a bonus is a testament to a job well-done, and now is the time to reward yourself.

Go and take a small portion (10-20%), and spend it on whatever you like. For some, it might be a new handbag, and for others, it might be the joy of giving back to the community or taking a weekend trip.

Whatever you fancy, treat yourself and others so that working hard for that next bonus is always a fun and rewarding journey.

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