Before you even clicked on this article, you were probably already thinking you have no problem spending your Christmas or year end bonus. As soon as we know we are getting a bonus, we think of things we could use and gifts we still need to buy for people. For some of you, the bonus amount may exceed $1000 and requires some additional thought before you spend it. If you are cautious but, don’t really know what to do then perhaps one of more of these options will resonate with you.
Wise Way One - Forgotten Christmas gifts. We all know people who are natural gift givers. The joy and love they feel when they give to others is unmatched by most of us. These aren’t the people I am referring to. Instead, it’s the last minute person who decided after all to join the party on Christmas Eve and doesn’t have a gift for the white elephant or dirty Santa gift exchange. This person may also have ignored the bottom half of the department email that said bringing a gift was optional for the exchange but, everyone else decided to participate. (This may or may not have been me this year.) It could also be a family member that you didn’t know would be there. If you have a few gender-neutral gifts ready to go, you will be the silent hero to that individual who would have been left out otherwise.
Wise Way Two - Replenish your savings. You may have had an unexpected expense this year that brought your savings account down so far you feel overwhelmed starting all over again. Don’t fret, it takes time to build it back up again. Getting that first couple of hundred back in there will motivate you to replenish it a little faster.
Wise Way Three - Pay insurance in advance. Many of us find it more convenient to have an extended payment plan for our auto and personal property insurance. However, there is a small cost for doing this. Extra costs mean more expense. Why not pay it all at once, save the extra fees, and put a little money back in your monthly budget to reach other goals?
Wise Way Four - Start a sinking fund for big expenses. For those of us who are not natural savers, we may even need separate accounts at different banks or find a bank or credit union that allows you to open multiple accounts for specific saving goals. These big expenses may be medical needs, car repairs or replacement, home repairs or improvements, and vacation funds. These types of expenses can really knock your monthly spending out of whack if you do not plan ahead. Use your Christmas bonus to get ahead of your future expenses.
Wise Way Five - Accelerate your debt payoff plan. You’ll never know just how free you will feel being debt free until you’re there. Rather than spending your Christmas bonus, use it to demolish your debt. Carrying debt costs you future money and earnings. You wouldn’t want to lose money by giving it to the credit card company for all the interest you’ll be paying would you? If you use that Christmas bonus on your debt, maybe you’ll be able to start the new year off right without any consumer debt!
Wise Way Six - Build some wealth. Make a year-end contribution to your traditional IRA account. Building wealth requires you to increase your “wealth money.” The money you save to help build wealth. Although you have until April to make contributions for the tax year, why not give that money a few extra months to grow? In addition, there may be additional tax savings for these contributions. Talk with your financial advisor to make sure you have not already maxed out your contributions for the year before you get your mind set on it. In addition, there may be other ways to invest the money that allow it to grow rather than dwindle quickly away.
Wise Way Seven - Donate to local charities. Your donation is tax deductible and many organizations that serve food or provide shelter are especially busy during the winter months. Your donation of $100 could serve a meal to over 40 people. Many organizations have matches that will double the donation if a certain amount is reached be other donors. It is refreshing to give back! Part of the reason we build wealth is to help others in need. The Christmas and New Year season is a great time to do help out.
Wise Way Eight - Start next years’ Christmas fund. Christmas fund accounts are available at many institutions and they encourage savings by charging penalties if you withdraw before the end of October. If you are anything like me, you typically spend more than you have saved through the year. As a result, your December budget is tighter than the rest of the months. Why not get a head start on saving for next year’s festivities and gift giving?
To be wise, we must explore all the options and potential returns. Invest? Give? Save? Save? Save? These are just a few of my favorite ways to use bonuses or unexpected jumps in income throughout the year. Whether you choose only one wise way, or split it between a few of these options, you will undoubtedly be counted among the wise in the year to come.
Merry Christmas and Happy New Year!