What Should I Do With My Annual Bonus?

Did you get an annual bonus at the end of 2022? If so – congrats! If you haven’t already run to the store or Amazon to spend it, you might be wondering what the most productive use for your extra cash is.

1. Set a Spending Limit

First and foremost, set the standard that you WILL and CAN spend a little on yourself now. However, you need to set a limit for how much that will be, especially when receiving an annual bonus. Don’t just spend tons of extra money the next few months while telling yourself “Oh, it’s ok – its my reward for my bonus.” You can’t keep using that excuse for splurging forever.

2. Fill Your Emergency Fund

Secondly, make sure your emergency fund is full. Do you have enough to cover 3 – 6 months of your emergency expenses? If not, consider filling it up.

3. Pay Off Debt

Next, look at your high interest rate debt. If you have credit card debt with a high interest rate – PAY IT OFF. Not only that, maybe just snip that card up, so you aren’t tempted to load it up again.

4. Save For Your Future & Goals

Save for future you. Have you put enough in your 401(k), Roth IRA, taxable account, or HSA this year? Maybe talk to your financial advisor and see if they suggest a boost. Don’t have an advisor? Reach out to me here!
Save for other goals. Are there any other important financial considerations in your life? Are you saving for a home? A new car? Perhaps you want to fund your children or grandchildren’s college expenses? Be sure to direct a portion of your bonus to these goals. You’ll feel energized when you make progress on these things.
I actually did list these goals in the order of priority that I personally view them. However, your own order of priorities might be different. Sit down with a pen and paper, and think through what’s important to you. If you are married, have a REAL conversation with your partner about it. Honestly, maybe even talk to a friend. I have talked before how beneficial I think it is to talk to friends about money. Once you have a plan, make it happen. Don’t let your hard earned bonus get absorbed into your daily spending!