It's the holiday season, and you and your company have done exceptionally well for the year, meaning that you should be earning a nice holiday bonus – and that old question will rear its ugly head: "Should I spend my bonus, or save it"?

Here are a few ideas for what to do with that little extra something in your check.

Key Takeaways

  • If you get a holiday bonus, you may wonder how best to spend that windfall of extra cash.
  • While you can splurge on yourself, you can also take a more responsible tack either gifting to others or getting your own finances in order.
  • Using a bonus to pay down debt or increase lagging savings goals are great ways to invest in your future with that money.

Be Generous

Everybody's been asking you for money: your alma mater, the local food pantry, large international charitable organizations and more. Now's the time to give. Show your appreciation for what you have by making a donation. According to authors Tom Rath and Jim Harter, Ph.D., it is more fun to give than to receive. Their book "Well Being: The Five Essential Elements" cites neurological evidence that giving money produces greater feelings of happiness than buying "things." Also, it's just the nice thing to do.

Prepare Yourself

According to a 2016 survey conducted by the Investor Education Foundation of the Financial Industry Regulatory Authority (FINRA), only 46% of respondents had a rainy day fund - and a 2017 survey by CNBC indicated that about 57 million Americans have no emergency savings. There's a place in every budget for unexpected expenses. It's called the "emergency fund" and it doesn't get nearly enough attention.

When you have an urgent need such as fixing the carburetor on your car or replacing the water heater, you need to be able to quickly pay for those items without adding to debt or incurring fees and penalties. Add the bonus to your emergency fund, because you just never know when you'll need some extra cash in the future.

Pay Down Debt

Improve your financial status by paying down debt. Making a lump-sum payment on debts such as credit cards, mortgages and student loans can shrink your principal and reduce the total amount of interest you pay.

For example: let's say you have a 48-month car loan for $20,000 charging 6% interest (annual percentage rate). The total interest paid would be $ $2,549. But, if you apply $1,000 of your bonus to the principal a year into your loan, you would save $192 in interest. In addition to reduced interest, it would take two fewer months to pay off the loan. Many financial experts agree that paying down debt first alleviates financial stress and improves overall financial well being.


You worked hard for your bonus, so instead of bringing home any more shopping bags from the mall, invest in a vacation. Take the kids and maybe the grandparents, too. There's no shortage of travel discount websites to help you make the most of your money. The resulting memories will last a lifetime, as opposed to right after the warranty runs out. 

Be Bullish

The stock markets have done very well over the past few years, with the Dow Jones Industrial Average (DJIA) hitting several new all-time highs. Whether you've already taken advantage of the upswing or not, adding to your holdings could boost your portfolio value. Of course, carefully select investments based on your specific objectives and risk tolerance levels.

The Bottom Line

Having extra cash sure feels good. Whether you decide to save your bonus or invest it (or maybe a little bit of both), chances are you'll be working hard to earn another one. So enjoy it while it lasts.