How to Spend Your Christmas Bonus

Many employers use the Christmas season to pay out bonuses based on company performance for the year. Sometimes these bonuses can be significant. If you’re fortunate enough to get an unexpected windfall this December, here are some ideas for getting the most out of it.

Give first
We’re big proponents of generosity at Sound Stewardship, and the Christmas season is an especially good time to be thinking about helping others out. A good starting place would be giving 10% to someone or an organization that’s meaningful in your life. It could mean:

• Leaving a much larger than normal tip to a server
• Giving to an organization working on the issues you hear about in the news
• Donating to a local nonprofit in your community
• Giving toward your pastor’s annual bonus, if your church does that (they would love one too!)

No matter how you give it away, you’ll find that this may be one of the most significant memories from your Christmas season.

The 50/30/20 Idea
So what do you do with the rest? Every situation is unique, but one of the guidelines I like is the 50/30/20 concept. The idea is that you split the extra paycheck 3 ways:

• 50% for paying off debt
• 30% for savings
• 20% for fun

Of course, since you’re giving first, this formula would be applied to the remaining amount. (The “10/45/27/18 Rule” doesn’t exactly roll off the tongue.)

For example, if your bonus is $1,000 (after giving), then you would use $500 to pay off credit cards, student loans, or other debt; $300 for your emergency savings; and $200 for fun money.

Just a guideline
The idea, of course, is that you can shift these numbers based on your particular situation. If you don’t have any debt, you could use 50% for longer term savings like retirement or education. If you don’t have any emergency savings, it might be best to put 80% of the bonus there, and use the remaining 20% for fun.

Not all fun is created equal
For the amount spent on fun, behavioral science says you’ll be happier buying experiences, rather than getting stuff. For instance, you could use your bonus to:

• Take a weekend getaway to a local bed-and-breakfast.
• Skydiving anyone?
• Do a tour of all the best local museums.
• Try an escape room with some friends.
• Go to a restaurant normally out of your price range.

Follow any of these formulas above, and you’ll get the best of all worlds: helping others, making financial progress, and having a little fun.

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