What To Do With An Unexpected Work Bonus Check

You’ve received a bonus at work – Congratulations! You are taking a step back and not spending it quite yet – but the temptation is definitely there. You’re looking for answers on what to do with this (perhaps unexpected) work bonus.

Note that I’m going to give you a few suggestions on what you could do with the money. These are all things you may want to think about. I do not suggest putting your money 100% into any of the suggested buckets. Pick at least a couple that make the best sense for your situation.

At the bottom of this page, I’m going to let you know what I personally have done with bonus money I’ve received in the past.

On to the suggestions!

Debt

Obviously, the first thing that is coming to my mind (and most likely yours) is debt. If you have any debt at all, you should consider putting this towards that debt. Hopefully, you were already on a plan to eliminate the debt you have. This bonus is going to cut down the months it was going to take you to rid yourself of this debt.

If you didn’t already have a plan to get rid of your debt, perhaps this unexpected bonus could really jumpstart things for you. Take this as an opportunity to make a plan to eliminate your debt.

What’s your current debt? How far into knocking out that current debt would this bonus put you? I’m not going to go too far into this – but I will say that applying at least a decent portion towards your debt is a smart decision. Check out my article on paying off high interest credit cards if you walk to go into the subject further.

I do want to add one additional thing to consider. No matter how much debt you have – even if it’s a $200,000 student loan – I would recommend putting half of this bonus money towards it. Sometimes we feel like putting money towards an enormous amount of debt won’t even make a dent. I promise it will if you stay focused and make a plan. This could be your first step towards doing just that.

Investing

Know that contributing to an employer sponsored 401(k) with a matching employer contribution should be priority one. Make sure you aren’t leaving any free money from your employer on the table. If you aren’t maxing out enough to get all the free employer money you can, make that change to your 401(k) contributions now while you have the extra funds.

You could also invest into a Roth IRA. Unfortunately there are some income limits that are listed on the IRS website here (Under Roth IRA). However, if you fall below the limits, this is definitely something to look into after you’ve maxed out your employer’s matching contribution amount. Your dollars go in after you’ve paid taxes. Your Roth IRA contributions will allow your dollars tax-free growth. While you’re in retirement, the withdrawals will be tax-free as well.

Consider The Unexpected

Unexpected things happen. Are you prepared for a large unexpected expense? Are you ready to purchase a new car if yours breaks down? Does your house have a roof that’s coming to the end of it’s life?

These are just some things to consider. Most of the time, bonus money from our employers doesn’t roll around very often and you do not want to regret putting it towards items or luxuries when something unexpected could happen weeks after. Make sure you’re prepared for the unexpected and you have an emergency fund.

If an emergency fund isn’t something you do currently have, this would be the perfect opportunity to start one.

Invest In You

This is my favorite on the list. Invest in yourself! Have you been considering going back to college to complete a degree you didn’t finish? Or maybe there’s a certification you have been eyeing that could possibly allow you to advance and earn more. Maybe there’s a robotics class that you’re interested in that could open some additional doors. This could even lead to a complete career change if you’re unhappy with the path you had previously chosen.

Perhaps your employer will even pay for a number of these classes! Be sure to ask them before you make any investment with your own dollars.

Do you have a hobby that could potentially be a side gig if you just had the money to invest in some start up supplies?

If you have a hobby that you love, think of ways you could possibly turn that hobby into a side gig. With this extra money, you could create a website or buy the tools you need to turn your dream job into reality. This is the perfect opportunity to get going.

Take this money and do just that – Invest in yourself.

What I’ve Done In The Past

I’ve received a work bonus each year (sometimes twice a year) for majority of my working years. I set a rule for myself early in the beginning that I would use half to pay a debt or invest and the other half for however I wanted to spend.

I never calculated any of this money in my budget. Like I said, it wasn’t every year I saw a bonus check and some years I saw two. I purposely did not include it in the budget section of my income so that I would never be caught in a bad spot if the bonus didn’t come. When it did come, I knew I could spend it all and it would not negatively impact the financial path I was on. However, I made a promise to myself to always apply at least 50% to debt or investing and blow the other 50% on whatever I wanted. (Which was usually a family vacation, depending on the amount.)

Most years, I used more than half of what was received on debt. The goal was to pay my student loans off faster or pay off a balance on a credit card. In the beginning, I rarely put any of the money in investment accounts, although a good portion went straight into my employer 401(k) before I ever saw a check.

What did I do with the other half? Sometimes I let it beef up my checking account while I considered what to do with it. It always came around Christmas and I used to spend like a crazy person on my kids and family during Christmas so some of it went to that.

I think it’s important to know what your maximum amount is that you will take out to reward yourself.

Knowing I did the “right thing” with 50% of the money, makes the whatever-you-want money feel more guilt-free. I worked hard for that bonus. You worked hard for it. I believe you need to reward yourself with a portion.

Wrapping This Up

In conclusion, it’s your decision. Weigh the suggestions and make a plan.

If you’re just now hearing rumors of a bonus coming your way, even better. You can make a thoughtful decision on what is best for you well in advance.

Congratulations again on your money!

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