Beating Broke Rule: Spend your Bonuses wisely.
Every year, many of us are lucky enough to receive some sort of bonus from our employer. (If you’re self employed, that’s bonus enough. ) And when we do, the inevitable question arises. What do I do with the money? And then, how to budget for it?
The simple answer is to spend it wisely. In a more complex answer, it depends on what your goals are for your financial life. Using your bonus to buy Christmas presents may make you feel good for a month or two, but will you feel guilty afterward? You’ll feel much better, in the long run, if you spend the money wisely towards your goals.
Here’s the downside to that, though. You’ll also feel guilty if you use it all for debt repayment. Each of you will have a different situation, but here’s how we usually use our bonus here in Beating Broke.
Consider taking 10% of the bonus and blowing it. Buy some presents. Take your family out to dinner and a movie. Whatever you want. Give yourself 10% in cash and free rein to do whatever you want with it. You’ll feel better when you do.
With the remaining, take a look at your situation. Do you have a purchase that you’ve been saving up for, or putting off until you could afford it? I’m not talking about those gifts, or the television upgrade, but things that you really need. Maybe some costco eyeglasses? For example, a portion of my bonus (if I get it) will go towards buying new tires for one of our cars and paying for a repair that one of them needs. It won’t take the whole bonus, but a good portion of it. And it will be extremely relieving to not have to come up with that money out of my normal paycheck. If the bonus doesn’t come, I’ll still have to pay for those things, but it might take a little longer to pay for them.
Maybe your situation doesn’t have a purchase like that that you need to pay for. But, maybe you’ve got some debt that it could help retire. What we don’t spend on tires and repairs, will likely go towards paying off a debt. It won’t pay off any of them all by itself, but it will cut the payoff by several months. And, while that doesn’t give me the same feeling that just blowing the money on stuff does, it will leave me feeling much better for a far longer time.
The bottom line is this. Think about how you spend your bonus and spend it wisely. You’ll feel much better for it.