Yahoo Finance 7 Smart Ways to Spend Your Holiday Bonus
If you received a holiday bonus this year, make sure that you put your hard-earned dollars to good use as the new year unfolds. It may be tempting to splurge on something you wanted but didn't receive for Christmas or to treat yourself to a pricey extra after enduring the stress of the holidays. Resist that temptation. A few smart money moves now could become a much bigger treat later. Before you plunk down for a shiny TV or an expensive night out, consider these seven smart ways to spend your holiday bonus.
1. Reduce holiday debt. For many of us, it's not easy to get through the holidays without relying on plastic to cover the bills. If you fell into the credit card trap this year, your holiday bonus can help you exercise some damage control before the interest charges become a serious drag on your budget. Consider using some of your holiday bonus to pay down -- or pay off -- balances on any high-interest credit cards you used this holiday season. Even just one extra payment made before your bill arrives can reduce your exposure to crippling interest charges.
[See: What to Do If You've Fallen (Way) Behind on Your Credit Card Payments.]
2. Buy some upgrades and quick fixes. Use your bonus to perform some repairs on your larger investments, such as your home or your car. Maintenance items on your home that are beyond your DIY skills -- and that you have been putting off because of cost -- are great candidates for holiday bonus spending. The same is true for your car. Use the freedom afforded by your bonus to clear these fixes and upgrades off your "someday" list without harming your budget.
3. Invest in your 401(k). Most tax-filers can contribute up to $18,000 to their 401(k)s in 2017 (and up to $24,000 if they're over 50), so your holiday bonus could go straight toward your nest egg. If you aren't already contributing to a 401(k), either through your employer or on your own, use your holiday bonus to start a new fund. Your investment will pay off in a few short years, and you can deduct contributions to a traditional IRA if you meet certain conditions. Talk to a financial planner about your options, so you can make an informed decision with your account.
4. Plan to shop the markdowns. If you really must make some purchases -- and you're all caught up with holiday debt and other financial responsibilities -- January is often a great time to shop for discounted Christmas decor, furniture, big screen TVs, video games, linens and a lot more. You can stretch your bonus dollars even further by taking advantage of holiday weekend sales, such as Martin Luther King Jr. Day in January and Presidents Day in February for even better deals.
[See: 10 Money-Saving Websites to Check Before Shopping.]
5. Buttress your emergency fund. One way to make your financial life less stressful is to set up a robust emergency fund that will see you through whatever financial storm comes your way. Most financial experts agree that Americans should keep three to six months of living expenses in a savings account or money market account, just in case. Tally up a month's worth of expenses and multiply by the number of months you're comfortable with. Is your current emergency fund big enough to see you through a job loss or other crisis, such as a pricey car repair or emergency home repair? If not, you know what to do with your holiday bonus.
6. Invest in your education or professional skills. If you want to perform better at work or you're eager to earn a raise this year (and a bigger holiday bonus), consider polishing up your skills or going back to school. You might choose to spend your holiday bonus on an online certification course, a university program or even a noncredit course at a local community college. You'll increase your skills and your knowledge while making yourself more valuable to your employer. Investing in your education and professional skills could give you additional earning power and help you build up your resume for the next hop up the career ladder.
[See: 12 Simple Ways to Raise Your Credit Score.]
7. Invest in your health. Nothing is more valuable than your health and well-being. Unfortunately, our health tends to decline over time. One way to slow the effects of aging is to invest in your health with a sound fitness regimen and healthy eating habits. Use your holiday bonus to pay for a gym membership, personal trainer fees or to hire a nutritionist to get your diet on track. A small investment today could mean lower medical bills and fewer health problems tomorrow.
Spend your holiday bonus on any of these smart investments and your future self will thank you.
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