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You worked hard all year and were awarded an amazing bonus. It’s time to go on a shopping spree and treat yourself — because you only live once, so why not live it up?
Let me stop you there: Don’t spend it all in one place. Of course it’s important to treat yourself, but within reason.
There are most likely buckets that need to be filled to help set you up for success with your end-of-year and 2026 financial goals.
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Here are five smart things to do with your year-end bonus.
No. 1: Pay down debt
If you’ve been living beyond your means, it’s vital to pay down debt.
Credit cards, which charge extremely high interest rates, should be considered a priority to be paid off first. Otherwise, you’re losing money by paying these fees.
Mortgages, student loans, and auto loans often charge lower interest rates, so those are usually fine to pay off monthly.
However, before making another large purchase, it’s important to pay down these expenses.
No. 2: Contribute more to retirement savings
If you aren’t contributing to or maxing out your retirement savings accounts — think 401(k), IRA, Roth IRA, etc. — then I would look hard at making a nice contribution to one of these accounts.
Keep in mind the contribution limits of 401(k)s ($23,500 in 2025), and traditional and Roth IRAs ($7,000 for individuals under age 50, $8,000 for individuals 50-plus).
Because of compound interest, your contribution can pay off when you reach the point of thinking about retirement. Your future self will thank you.
No. 3: Bulk up your emergency funds
Most financial advisers will likely recommend that you have three to six months of living expenses in your emergency fund in case someone loses a job, gets sick or has an unexpectedly large expense.
This fund allows you to take care of yourself and your family without having to stress or touch investment accounts or those that are hard to access.
A year-end bonus would be a great way to start or replenish an emergency fund. Start small and build on it over time.
Life happens, and it would be great to be more prepared next time you have an emergency.
No. 4: Fund a future expense
Something I started doing is to anticipate and plan for two big expenses that happen every year, way before I need the money: holiday gifts and summer camps for our children.
I started allocating part of my budget every year to set aside for these two major recurring expenses. I budget for the camps through my flexible spending account (FSA), but I have also started putting a portion of my year-end bonus into these future expenses.
I invest the money in a high-yield cash account, then pull my FSA money only twice a year to pay myself back, then invest that, too.
It can be a win/win and help take the stress of high expense periods away from me and my family.
No. 5: Save for a big trip, house project or fun purchases
Most of the other recommendations were very responsible, so here’s something a little more fun (in a responsible way).
Have you always wanted to go on a trip, remodel your kitchen or buy e-bikes so you can ride to the beach? Now is the time to start a “fun fund.” If you don’t plan for it, it will never happen.
Consider putting a portion (or all) of your year-end bonus into a high-yield savings account. Contribute to it regularly, and before you know it, you’ll be ready to check that thing off your bucket list.
This year, when you receive that year-end bonus check, take a breath and think about how these funds might impact your financial future.
Instead of buying a toy your kids will forget or an expensive bag that will only be in style for a few years, consider your long-term financial goals.
Saving and achieving your financial goals is fun, too — it just takes a little planning.
If you need more help deciding how to invest your year-end bonus, contact your financial adviser to help you get started.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
