How do You Spend a Bonus Check?

March 13, 2008

Annual bonuses are here!  Our company did well enough in 2007 that we’re getting a bonus, 3% of our salary is the rumor.  They’re supposed to show up in our bank accounts or mailboxes tomorrow so the office was buzzing with talk of different ways to spend the money this afternoon.

How to Spend a Bonus
I only heard one person say that the money was going in the bank, everyone else had plans for how they’d spend it.  Here are some of the things people are planning on doing:

  • Buying a big screen TV
  • Finishing their basement
  • Going on vacation
  • Buying new appliances
  • Paying off a credit card

An Excuse to Spend
One of the things I noticed is that the bonus tended to be a spending enabler in the sample of people I talked to.  Many people had things they wanted to spend a lot of money on but just couldn’t pull the trigger.  Now that they’re getting a check for a grand or more they feel okay going ahead with a purchase.

The bonus isn’t going to cover the big TV, a basement remodel, a vacation, or new appliances, most people are simply treating it as a down payment on those things, a green light to spend money.  Of course, I couldn’t help but wonder if they’d be better off just depositing the check for a rainy day.

Spending Wisely
Of course, I’m not saying that people shouldn’t spend their bonus check, as a matter of fact that’s just what I’m going to do.  We’re going on a big trip this year and the bonus will help pay for it.  The key difference is that we’d already planned the trip, we were already saving for it, the bonus will just help us get to our savings goal faster.

In my opinion, a bonus check that triggers random, unplanned spending is not being put to the best use.  Maybe put the check in the bank for a few months, sit on the money, and think about it.  Then spend away!

Oh and congrats to the lady that’s paying off her credit card debt, now that’s smart spending!


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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7 Responses to How do You Spend a Bonus Check?

  • Mr. Debtbeater

    I just got my letter stating we’re getting bonuses next month, and it’s got a nice little spot in my budget where it’ll get applied just like it came from a regular payday.

    If I weren’t in debt and had a bunch of investments already going and all, sure, I’d probably splurge on an unexpected bonus. However, any other circumstances and I’d say a huge majority of the check should be put to work toward debt reduction and pre-defined goals.

  • keri

    What funny timing, I just got a bonus check last week and I put it all towards my CC debt which along with a great week of also receiving my tax refund allowed me to pay off a large chunk and almost reach my milestone of zero cc debt. We receive bonuses semi-annually so I know at the end of summer I’ll be getting another. That one is already going straight into the emergency fund.

    5 Years ago I probably would have splurged big time, now I know better. 😉

  • dong

    I think it’s true for most people that bonus income should be treated the same as regular income. For some people i.e. investment bankers and the like, bonus checks outstrip the annual income for the rest of the year. This creates specific problems when it comes to investing and cash flow management.

  • No Debt Plan

    Any additional income — bonus or not — should be treated in the same way as regular income. If you are using a budget, it should just fall to the bottom (free cash flow, which I discussed today). You might take out 1%, 5%, or 10% for ‘free spending’. The rest should be used as any other free cash flow — applied towards debt, savings, or retirement/investment.

  • Jerry

    @ Minimum Wage, you work at a company that pays bonuses. I worked in the mortgage banking industry before insurance and they paid bonuses twice a year. Of course, our salaries were a bit lower to compensate for the bonuses. It was nice to get them but they just barely brought us up to a living wage. I have a master’s and you’d think that would lead to a high paying job. It doesn’t always work out that way.


  • Minimum Wage

    I’d use it to start an emergency fund.

    But a more fundamental question might be,

    How do you GET a bonus check?


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