9 Smart Ways to Spend Your Holiday Bonus

The holidays are a time for watching festive movies, spending time with loved ones, enjoying hot chocolate, and sometimes even receiving a holiday bonus. But here's the truth: if you don't have a plan for that extra cash, it can disappear faster than wrapping paper on Christmas morning.

Your bonus isn't a free-for-all. It's an opportunity. And without a strategy, impulse buys today turn into regret by New Year's. Don't let your hard-earned money melt away like snow in the yard. Put it to work and make it stretch further. Instead of letting your money call the shots, take control. Follow these tips and see how to enjoy your holiday bonus while also setting yourself up for financial success in the new year.

Boost Your Emergency Fund

The first and most important step to achieving financial freedom is to build an emergency fund. Start out by saving $1,000 in case of smaller emergencies, and then work your way up to cover 3-6 months of living expenses. If your emergency savings are low or you need to build it back up, putting your bonus towards this can give you peace of mind knowing you won’t have to use a credit card in case of unexpected costs.

Knock Out Your Debt

If you already put some Christmas décor or gifts on your credit card, now is a great time to use your bonus to pay them off. You could also put this money towards paying off your car or mortgage.

An easy way to make a plan to pay down your debt is by using the debt snowball method. This can help keep you motivated by wiping out smaller balances first and using that momentum to eventually pay off all of your debt. Plus, not only can using your bonus help you get closer to becoming debt-free, but you’ll save money in interest over time. It’s a win-win!

Prepay Upcoming Bills or Expenses

Prepay upcoming bills or expenses to give yourself breathing room and peace of mind. Using your holiday bonus to cover next month’s utilities, insurance, or other recurring costs can help you stay ahead and avoid dipping into your regular income. It’s a smart way to reduce stress and keep your financial goals on track while starting the new year with less pressure.

Invest in Yourself

Investing in yourself can pay off in the long run. You could use your holiday bonus to pay for courses, certifications, or skills development that can help you advance your career and boost your earning potential in the future. If going back to school for a degree is part of your long-term plan, this could be the perfect time to start a dedicated savings account to make that goal a reality.

Plan Ahead for Tax Season

Don't let taxes blindside you — set aside what you need now. If you receive a holiday bonus, keep in mind that it will be taxed differently from regular income. Consider setting aside part of it for taxes, especially if your bonus could bump you into a higher tax bracket. You can also consider contributing to a retirement account, such as an IRA.

Explore Investment Options

If you've crushed debt and built savings, start investing for your future. No matter what age, there’s no better time to start, because the earlier you start investing, the more you can potentially earn over time through compound interest — you’ll thank yourself later! You can also explore other investment opportunities, like EasyVest®, to invest smaller amounts with a digital advisor or choose your own investments.

Save for a Goal

Whether you're planning for a down payment on a home, retirement, or a big purchase, paying yourself first by saving your holiday bonus can be a great way to boost your savings without affecting your regular budget. Plus, you can earn more on the money by putting it in a high-yield savings account or a Certificate of Deposit with a premium rate.

Give Back and Live Generously

Generous living – and giving – can make an extraordinary difference in the lives of others. By making a charitable donation with your holiday bonus, you can support causes that make a difference in the community. Supporting causes that you care about not only makes a positive impact but may also lead to additional tax benefits in the following year.

Spend Wisely

If you’re debt-free and have a solid savings foundation, it’s okay to enjoy a small portion of your bonus—but only with a plan. Treat yourself intentionally, not impulsively. Choose something meaningful that fits your budget and doesn’t derail your bigger financial goals. Maybe it’s a nice dinner with family or a movie night you’ve been looking forward to. The key is to make memories, not mistakes. Every dollar should reflect your priorities.

Remember, before you spend your holiday bonus all in one place, it’s essential to create a plan for your money. By planning ahead and using your bonus wisely, you can make the most of your money while enjoying the extra reward for your hard work!