By Thomas Kostigen
Nearly two-thirds of businesses give out holiday bonuses to employees. And while it’s probably pretty tempting to spend that extra dough on something frivolous, it may be wiser to think of the money more as a calendar note to take a hard look at your finances.
The first reminder is that the longer the extra cash stays flush in your checking account, the more likely you’ll spend it. So financial advisers recommend moving dollars into a savings or investing account sooner rather than later.
To be sure, it’s easier to have an adviser counsel you on what’s best for your financial health rather than hope that you exert self-discipline during the height of shopping season. Many advisers will even recommend that you do spend some of your bonus money. Enjoying your hard-earned income is actually financially savvy.
“Frugal fatigue” can be more harmful to long-term financial plans than overspending now and again. That’s because feeling as though achieving financial goals is too daunting can throw you off course — for good. A splurge once in a while can be reconciled within a financial plan.
If you are taking your own sobering, financial advice on what to do with that bonus money, perhaps have a look at your debt first, and pay some of it down. Next would be to add to your emergency fund. (And if you don’t have one, it’s a good way to open one.) After that, contributing more to your retirement or college saving account are good options, too.
Or, it’s this amount of money — about $1,800 on average per employee in the United States — that can help get you that dream vacation. Even hardcore savings proselytizers like Dave Ramsay render this kind of “head start” advice. Of course, he also gives people another option to consider: “Take your Christmas bonus then add your company match and multiply it by however many years until you retire. That equals lots of cruises and golf games. Do that every year, and your small bonus will turn into a proper nest egg.”
Besides saving, investing and planning for expenses ahead of time, there is one other consistent piece of advice from financial professionals: give part of that bonus money away. Donating money has an extremely positive effect on the giver.
According to the charitable organization, Save The Children, “Studies show that donating money to charity has been proven to have a positive impact on the brain. These effects are similar to activities people usually associate with joy and happiness such as eating, exercising, or affectionate gestures like giving someone a hug. Different chemical reactions can lead to an ongoing pattern of improved mental health and well-being.”
It seems appropriate to think of more than ourselves — even when we’re coaxed into spending that “gifted” extra money on Black Fridays, or Cyber Mondays, or after-Christmas sales — and to pay forward some of that bonus check to someone or an organization in need. That’s the true holiday (bonus) spirit.
Thomas Kostigen is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Thomas is a best-selling author and longtime journalist who writes about environmental, social, and governance issues.
