How to Make the Most of Your Bonus

One of the most-awaited moments at work would be the time of the year when bonuses are released. The typical bonus that is released by most companies would be the 13th month bonus. Usually given to employees as a way to recognize a job well done, the 13th month usually amounts to an entire month of pay. Other companies also pay a performance bonus, should their thrust of business be based on sales. So should the company or a certain department rake a lot of sales, all the employees involved would receive a bonus as part of the collective effort to generate the sales. As bonuses usually come up to a sizable amount, a lot of people tend to wipe it all out in one go. In order to make the most of your hard work, here are ways on how you can best handle your bonus:


Allocate the bonus for all your payables

Before you get your bonus, it is good to assess your financial situation. If you have a lot of payables, make a list of all your debts. Once your bonus comes in, make it a point to pay off all your debts. As the bonus is usually a sizable amount, it can be used to wipe out a lot of debts you have incurred during the year. Should your bonus fail to cover all your payables, then make an assessment of your payables and see which ones need immediate attention. Try to prioritize those payables that accrue interest, such as credit card bills and loans. Should you fail to pay them, the penalties will just pile up and you will end up paying more in the future. So try to knock off as many payables as you can, especially for the backlogs.


Set aside a certain amount for savings or investments

Once you have paid all your payables, you should make sure that you put aside funds for your investments or savings. After paying your debts and should there be some remaining amount, set aside at least 10% of the remaining balance for your savings. Always remember that your savings should be the first source of funds, in case of any financial emergency. So should you have a big sum coming in, such as your bonus, make sure to set aside majority for your emergency fund, granted that you do not have any debts. However if you are debt-free, it is best to place 90% of your bonus into your savings, or better yet, into investments such as mutual funds and the likes to allow it grow over a period of time.

Do not spend your entire bonus on purchases

It is tempting to spend the entire amount of your bonus on purchasing big-ticket items or buying gifts for your family. But do not also deprive yourself from spending since you worked hard for that anyway. Set aside a spending limit, say 20% to 30% of your entire bonus, and use that for all the things you want to buy for yourself and your family. But remember, this budget for spending would depend on whether you have existing accountabilities. Just adjust the percentage in accordance to your payables.

Live below your means

The golden rule for financial freedom would be living below your means. One common mistake a lot of people commit would be borrowing against their bonuses. As most people have a rough idea as to how much their bonus would be, a lot of people would swipe their credit card or make loans with the mindset that their bonus will be able to cover their debts. But more often than not, the bonus will be diverted to other expenses and the debts you will have incurred will just pile up. Should you have any existing debts, they will just be added onto your past accountabilities, placing you in a deeper financial pit.


Always think long term

Try to change your paradigm when it comes to the way you treat your bonus. Take your bonus as additional savings and not as additional income to spend. Always make it a point to spend money which you have earned. The bonus, after all, is a bonus. So it should be used to either pay up past dues or should go into savings. They should not be used to buy frivolous things that you can live without, especially if there are more important things that need your priority.

Always remember that your bonus is additional money that should be put to better use. Do not be hasty to spend it all in one go. After all, it is hard earned money. Therefore make sure that it will help alleviate your financial situation and not create bigger problems for yourself.

Photo Attribution:

1st photo – Stuart Miles / (

2nd photo – Stuart Miles / (

3rd photo – Stuart Miles / (