If you’re fortunate enough to receive a year-end bonus, don’t be tempted to spend it immediately. Consider putting your hard-earned bonus to work for you.
Here are a few ways to wisely invest that extra money:
1. Fun money
It is important to recognize the importance of fun money and reward yourself for a job well done. My advice would be to follow the 10 per cent rule, which means only spending 10 per cent of your bonus on something fun of your choosing, but the remaining 90 per cent of your bonus should be spent on one or a combination of the items listed below.
2. Pay off debt
With all the shopping and spending that goes hand-in-hand with the holiday season, it’s common to feel a financial pinch. Instead of accumulating debt into the New Year, use your holiday bonus to try to pay down old debts.
3. Invest in yourself
Invest in your future by using all or a portion of your holiday bonus to contribute to your retirement nest egg through an RSP or TFSA contribution.
4. Put it against your mortgage
Many financial institutions allow you to make a lump-sum payment against your mortgage up to a certain percentage of your mortgage principal amount. Use your bonus to pay down your mortgage sooner, which will in turn save you money in interest costs.
5. Start an emergency fund
Another great way to make the most of your holiday bonus is to use it to start an emergency fund. An emergency fund should act as a financial cushion to help soften the blow of life’s unexpected and expensive surprises.
