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More than half of American employers gave their employees bonuses last holiday season.
If you're expecting a bonus this year, one financial planner suggests using 80% of it to pay off debt and increase savings, and 20% to spend however you like.
According to a survey of 500 US businesses by recruiting agency Accounting Principles, 63% of employers spread holiday cheer via check at the end of 2017, gifting workers an average cash bonus of $1,797.
If you're expecting an end-of-year or holiday bonus, Katie Brewer, CFP and founder of financial planning firm Your Richest Life, suggests making a plan for the money before it appears in your account.
Generally, Brewer told Business Insider, you should commit 80% of your holiday bonus to "serious money," using it to pay off debts, increase savings, and top off retirement funds. The other 20% can be fun money, she says.
It's easy to think of a dozen uses for your "fun money." But what about that 80% you're dedicating to building wealth? Where should you start?
Below, we've put together a flow chart to help you figure out where your serious money can make the most impact. The chart assumes that you're making regular payments toward any debt and are without extenuating circumstances, like an expected end-of-year medical bill or other urgent charge to which you've already committed your bonus.
Tanza Loudenback is a personal finance expert and a Certified Financial Planner (CFP). She was the founding reporter of Personal Finance Insider, covering topics including taxes, retirement planning, banking, real estate and mortgages, and budgeting. Her work has been featured in WSJ Buy Side, Fortune Recommends, Korn Ferry, TheStreet, Morgan Stanley Wealth Management, and Fidelity. ExperienceTanza was the first reporter on the Personal Finance Insider team. In addition to helping build the vertical from the ground up, she helmed a biweekly advice column answering readers’ personal finance questions and launched a personal finance newsletter. She also published two e-books under the Personal Finance Insider brand.She was the editorial lead on Master Your Money series, a two-year-long Business Insider series providing financial advice to millennials. She managed Master Your Money bootcamp events over the course of the series. While at BI, she also expanded tax coverage to include a guide to the best tax software and commissioned a panel of experts to review all articles. Tanza obtained her CFP license in 2020. She aims to simplify personal finance concepts for readers so that they can make smart decisions with their money. ExpertiseTanza’s areas of personal finance expertise include:
Real estate/mortgages
Taxes
Retirement planning
Small business finances
Banking
Budgeting
Education Tanza is a graduate of Elon University with a degree in print and online journalism, with a minor in Italian studies.
