The Best Ways to Use Your Year-End Bonus (and the Worst)

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As the year wraps up, many of my clients are looking forward to their annual bonuses. Getting a year-end bonus can feel like winning the lottery, creating a natural urge to spend. But if you’ve ever watched National Lampoon’s Christmas Vacation, you’ll remember the scene where Clark Griswold excitedly commits to installing a new pool before his bonus arrives — only to find out it’s a Jelly of the Month Club membership.

As a financial adviser, I always remind my clients at this time of year that bonuses are best seen as part of their annual compensation rather than a one-time windfall. By recognizing and prioritizing long-term financial goals, it’s possible to make smart, intentional decisions about the money — whether that means spending, saving or investing it, or a little of each.

Here’s how I approach the year-end bonus conversation with clients, especially when the temptation is to treat it like “found money.”

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Reframe your mindset

When people see a bonus as simply “extra,” they’re more likely to spend it quickly, sometimes on things that don’t move them closer to their financial or personal goals.

Instead, it can be helpful to view bonuses as a form of planned income. For example, a $12,000 bonus becomes an extra $1,000 per month — an amount that’s easier to allocate toward meaningful goals like building an emergency fund or paying down debt. This mindset shift helps keep spending intentional, leading to choices that strengthen financial stability over time.

Take an NFL player, for example — they’re paid per game and have a high income during the season, but without careful planning, they could come up short in the off-season. Year-end bonuses can play a similar role in anyone’s finances. Planning ahead and spreading the income out can prevent the all-too-common “spend it before it’s even hit the account” pitfall.

Consider your priorities

Once we’ve shifted the perspective on a bonus from “extra” to “essential,” it’s time to think about priorities. Consider ways to leverage your bonus to free up monthly cash flow. Paying down high-interest debt, building up your emergency fund or contributing to retirement or college savings accounts are all smart ways to make your bonus work for you and get you even closer to some of your financial goals.

People often ask whether a year-end bonus should be spent on one big priority or split across multiple goals. Usually, the best approach is a bit of both. Dividing the bonus between immediate needs and long-term goals can be especially helpful for couples who may have differing ideas on how to use the funds.

If one partner prefers to pay down debt while the other wants to enjoy a vacation, for example, they could allocate half to the financial goal and half to the experience. This way, the bonus addresses key financial goals and provides something enjoyable in the present — striking a balance that helps meet both practical needs and personal values.

How can you invest in yourself?

Beyond financial priorities, a year-end bonus can also be an opportunity to invest in personal growth. Some clients use their bonuses for professional development, education or even a vacation to recharge. Investing in yourself — whether by building new skills or taking time to reset — can have lasting benefits for both personal satisfaction and long-term financial well-being. Sometimes the best investment we can make is in ourselves.

This could mean funding a course to enhance your career, prioritizing wellness with a new fitness regimen or simply taking time off to refresh and recharge. Your bonus can be the resource that empowers you to improve your health, expand your knowledge or nurture your creativity. Investing in yourself often yields indirect but invaluable returns, like reduced stress, renewed motivation and even unexpected professional opportunities. With a thoughtful approach, a year-end bonus becomes more than just financial — it becomes a tool for self-investment that fuels long-term success.

Pace yourself

Even in a good year, it’s smart to avoid prematurely committing bonus funds to big purchases or locking yourself into financial obligations based on assumptions. Waiting until the bonus is in the bank before making decisions reduces the risk of overspending and allows for a more thoughtful, less rushed approach to planning.

A year-end bonus is a gift that can open doors to financial security, fulfillment and growth. Whether you choose to save, invest, give or enjoy it, the key is to do it with intention. With thoughtful planning, you can turn this year’s bonus into a powerful tool for a more secure and fulfilling future.

Signature Estate & Investment Advisors, LLC (SEIA) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. The information contained herein is for informational purposes only and should not be considered investment advice or a recommendation to buy, hold, or sell any types of securities. Securities offered through Signature Estate Securities, LLC member FINRA/SIPC. Investment advisory services offered through SEIA, 2121 Avenue of the Stars, Suite 1600, Los Angeles, CA 90067, (310) 712-2323.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Frank Legan is a Cleveland-based author and a Financial Adviser with SEIA. Frank spends his days designing and implementing personalized financial planning strategies for corporate executives, business owners, artists, families and retirees. He focuses on lifetime income planning strategies, investment advice and estate planning services. He also works with businesses to develop strategic and succession planning strategies.