Holiday Bonuses and Financial Choices: Tips for Maximizing Your Holiday Bonus Check

Many professionals receive some sort of bonus check for the holidays. This bonus can be based on the employee's performance for the year, on the company's performance or it can be a set amount based on their salary. When determining how to use this money it is important to think about how it can be used to develop long-term benefits as opposed to only developing short-term pleasure.

Step #1 - Divide Your Check

A holiday bonus check is frequently used to pay for holiday gifts, parties and vacations. This is a valid use for the money, however, once the money is spent on these things there is little subsequent benefit that can be reaped. On the other hand, if you use the money to improve your financial position, then you will be able to reap a number of on-going and long-term financial benefits. The first thing that you will want to do when you get your check is to divide the funds into holiday fun money and financial improvement money.

Step #2 - Take a Look at Your Debt

The next step is to take a look at your debt. Start by looking at any bills that are unpaid or behind. Determine how much money you will need in order to bring these bills current. Using your holiday bonus to do this can help to reduce your holiday stress and to make the New Year easier to handle financially.

After you have brought your bills current, take a look at your credit card debt. Apply some of the money from your holiday bonus to paying down or paying off the credit cards with the highest interest rates first. Then you can pay down the lower rate cards.

If you have a mortgage, particularly a second mortgage, then consider paying down the principle balance with your holiday bonus. Paying off a second mortgage can provide two benefits. First it will help to reduce your monthly expenses, and secondly it will provide you with a financial asset that you can draw upon if you need money in the future for medical bills, home improvement, retirement or your children's education.

Step #3 - Consider Investing Your Money

If you have any money left look at possible investments that you can make. These investments can be IRA contributions or personal investments. Also look at investing in your small business by updating equipment by the end of the year so you can write off the expenditures and provide you with a tax benefit.

Step #4 - Don't Forget Charitable Gifts

Finally, spend a portion of your holiday bonus on charitable gifts. These gifts will not only help out others in your community or the world, but they will also provide you with tax benefits.

References

http://www.allbusiness.com/personal-finance/individual-taxes/2483-1.html