7 Smart Ways to Spend Your Year-end Bonus

March 09, 2020  |  Porte Team

If your company pays you a year-end bonus, consider yourself one of the lucky ones. A bonus can make you feel like you’ve hit the lottery and want to spend it all in one place. (Make it rain!) But as easy as that can be, try to hold off.


Tips on Spending Year-End Bonus

When you have an (un)expected windfall, there’s always a dozen things you can think of to buy. Gifts for the holidays? New furniture? Or, what about the latest gadgets everyone is sure to have?   There are other things you can do with a year-end bonus. Read on for seven smart ways you can spend that extra cash.


1. Make a plan

A plan works better when you write it down. Even if you don’t know the exact dollar amount you’re receiving, you can decide what your highest priorities are when you pocket that hard-earned bonus. Now is the time to sit and think of your current financial status. Here are a few questions to help you figure out your starting point.

  • Are you current on all of your monthly bills? Extra money is a good way to catch up on those recurring expenses if you’ve fallen behind.
  • Do you have debt? What’s the total amount? Think about credit cards, outstanding medical bills, and any other bills that should be included in the total.
  • Where are you going to keep the money? Make the decision now if you’ll keep the funds in your checking account, or savings while you figure out what you’re going to do with the money.

Any time you receive a large amount of money, you should plan on how you’ll spend it. If not, you run the risk of waking up one to two months later with no idea where the money went (ouch!).


2. Kiss credit card debt goodbye

With your new plan in place, you should decide your next steps. Tackle your credit card debt first because of the high-interest rates they typically have. Your year-end bonus is a good way to pay off any outstanding credit card balances you have. Don’t know where to start? Check out these steps to knock out credit card debt.

  1. Organize all of your credit cards. Put them in order from lowest balance to highest balance.
  2. Make all of your minimum payments. This step makes sure you’re current on all of your credit cards.
  3. Pay off the card with the lowest balance. Congrats! Pat yourself on the back for this big win.
  4. Do not close the card! Closing the account lowers your available credit, which could hurt your credit score.
  5. Move to the next card with the next highest balance. Keep this process going as you pay off your cards.


3. Kick your student loan debt to the curb

Chances are you carry student loan debt. Nearly 43 million American adults — almost one-sixth of the U.S. population over the age of 18 — have a federal student loan balance. Use this bonus money to pay them off in full or put a huge chunk as an extra payment. Not sure where to start with paying extra on your student loan? Try a student loan payoff calculator.

There’s a catch to making extra payments though. You want any extra payments to go toward your principal balance, not the interest. Contact your lender to see how they handle extra payments. Some lenders will use the extra money to your next payment. That’s great, but it doesn’t help you take full advantage of your extra payments. You might be asked to designate your extra payment a few different ways:

  • In the app. If you pay via your lender’s app, you may be asked to select if you want your extra payment to go to your principal amount.
  • In writing. You may be asked to make the request by writing a letter.
  • On your check. If you make your payment by check, be sure to label your payment in the memo section as ‘for principal amount.
  • With a customer service agent. You may be asked to make the request verbally with a customer service associate over the phone.


4. Emergency fund or nah

Think of an emergency fund as a just-in-case fund. Life happens. Your stress level will be a lot lower if you’re financially prepared for those emergencies. Most experts recommend having 3-6 months’ worth of expenses saved. Figure out the right amount for you. Not sure where to put your emergency fund? A money market or Savings Account1 will make funds easily accessible while earning interest. There are many options available – online and brick and mortar banks – where you can have your money market account. Do your research, so you can find the best option for you.


5. Bulk up your retirement

Your retirement accounts may provide an easy tax-deductible option for your bonus money. Check with your employer to see if you can deduct some or all of your year-end bonus to your 401k. You’ll get the tax benefits and save at the same time. If you’ve maxed out on your 401k for the year and earn less than certain income thresholds, think of opening an IRA or maxing out your IRA contributions for the year.


6. Save and invest for the future

While saving and investing in retirement plans are one option, you can also open a personal investment account to save and invest for the future. There are many different types of brokerage companies where you can invest your money. Are you at a loss as to where to start? Ask family or friends for recommendations or start with the brokerage firm that holds your employer-sponsored retirement plan. Most offer options for personal investing accounts also.


7. Enjoy your hard work

You didn’t hit the lotto, so don’t think you have to spend it all at one time. Instead, think of it as earned income. Because it is, and you worked for it. Don’t spend (or save) it all in one place. As tempting as it can be to save all of your year-end bonus, you deserve to have a little fun. Decide how much fun you’re going to have though. Maybe you want to try a new restaurant or buy yourself a gift. Find a way that you can enjoy some of your year-end bonus.

There are many things you can do with your year-end bonus. Whether you’re paying down credit card debt or student loans, you should have ideas of what you’re going to do with the money and stick to it. Plan now, then sit back and be proud of your wise money moves. You go, with your financially savvy self!

No results for “

Please try another search term.

Related Articles

  1. The optional Savings Account linked to your designated Porte account is made available to Accountholders through Pathward®, National Association, Member FDIC. To open a Savings Account, consent to receive communications from us in electronic form is required. Interest is calculated on the Average Daily Balance(s) of the Savings Account and is paid quarterly. * An interest rate of 0.20% will be paid on your average daily balance with an APY of 0.20%. * Additionally, the optional Porte Savings account allows you to earn a higher interest rate of 2.97% with an APY of 3.00% on an average daily balance of up to $15,000 during a calendar quarter if you (i) receive at least $3,000 in Qualifying Direct Deposits into your Porte Spending Account in that calendar quarter, AND (ii) make at least fifteen (15) Qualifying Debit Card Purchase Transactions from your Porte Spending Account in that calendar quarter. “Qualifying Direct Deposits” and “Qualifying Debit Card Purchase Transactions” have meaning ascribed to them in the Savings Account Agreement. The interest paid on average daily balances of over $15,000.00 will be 0.20% with an APY range for this tier from 3.00% to 0.20%. The interest rates and APYs of each tier may change. The APYs were accurate as of 05/2024. No minimum balance to open Savings Account. Savings Account funds are withdrawn through the Porte Account and transaction fees could reduce the interest earned on the Savings Account. See the Savings Account Agreement for more details. Funds on deposit are FDIC insured through Pathward, N.A. For purposes of FDIC coverage, all funds held on deposit by you at Pathward, National Association, will be aggregated up to the coverage limit, currently $250,000.00. Upon successful activation and registration f the Account, funds on deposit at Pathward, N.A. Member FDIC, are insured up to the standard maximum deposit insurance limit. Coverage limit is subject to aggregation of all of Accountholder's funds help on deposit at Pathward, N.A.
  • Apple® and the Apple logo® are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC. Porte is a mobile finance app, not a bank. Banking services provided by Pathward, National Association, Member FDIC.  Porte is a deposit account established by Pathward®, National Association, Member FDIC, and the Porte Debit Card is issued by Pathward, N.A., pursuant to a license from Visa U.S.A. Inc. Certain products and services may be licensed under U.S. Patent Nos. 6,000,608 and 6,189,787. Card may be used everywhere Visa debit cards are accepted. Porte is a registered trademark of Populus Financial Group, Inc. Populus Financial Group, Inc. engages in money transmission services as an authorized delegate of Ouro Global, Inc. (NMLS \\#932678). State licenses, disclosures, and complaint information may be found here [www.netspend.com/help/licenses](https://www.netspend.com/help/licenses){: target="_blank" rel="noreferrer noopener"} © 2024 Ouro Global, Inc.  Copyright © Populus Financial Group, Inc. 2024. All rights reserved.