The holidays just got happier: You received an end-of-year bonus. Whether it was expected or a surprise, a holiday bonus means your bank account is getting a boost … right at the height (or in the aftermath) of gifting mania. 

If your holiday shopping budget is giving you and your end-of-year bonus puppy eyes, resist. While we don’t believe in zero-fun budgets around here, we hold a firm stance that a holiday bonus isn't an excuse to splurge on stuff. (Since you’re here reading this, you probably suspect that.) Instead, we see it as a rare opportunity to help you hit your financial goals faster. 

Even if your year-end bonus wasn’t what you expected or seems like a small amount, it’s still worth using it to pratice good money habits that make women feel in charge of their financial futures. Impulse buying something from an alarmingly targeted ad can’t do that.

Here are the seven smartest money moves we believe you can make with a holiday bonus, in priority order.

1. Build your emergency fund.

If you don’t have an emergency fund yet, use your year-end bonus to kick-start your savings of one month’s worth of take-home pay in an FDIC-insured account that’s separate from your main checking or savings. (You’re gonna really want that money there when you need it.) If you’ve already started an emergency fund, aim to reach between three to six months' worth of take-home pay — whatever amount makes you feel taken care of.

2. Pay off high-interest debt.

List your debts with interest rates higher than 10%. Then, tackle them from highest interest rates to lowest interest rates. That’s to say, follow the debt avalanche method for those culprits, like credit card debt and student loan debt. See how it feels to watch that number drop thanks to your holiday bonus. If it feels good, you may want to keep up the momentum by cutting back to an essentials-only budget so you can pay over the minimums. If it feels meh, we promise you made Future You’s day.

3. Contribute to a tax-advantaged retirement account.

Many employers give workers the option to deposit part or all of their holiday bonus into their 401(k)s, a money move that can pump up your retirement savings and decrease your taxable income in one fell swoop. Don’t have an employer-backed retirement plan? Use your end-of-year bonus to fund a Roth IRA. 

4. Invest it.

Invest your holiday bonus at a pace that suits you: all at once and ASAP, or consistently and little by little. Studies show that the former, called lump-sum investing, is the choice to make to take advantage of the market’s trend upward (both historically and over the long term). But nobody can predict the future. And if you’re nervous about investing all at once, dollar-cost-averaging is a great option that gets you used to the risks (and perks) of investing. Set up autodeposits to your investment account for the complete low-fuss, high-impact experience.

5. Sync with a financial planner.

Not sure how investing works? That’s nothing to be ashamed of. Consider using your year-end bonus to secure a session with a financial planner for guidance and goal setting. For the best fit, look for a fiduciary who aligns with your values and understands that investing for women is just different. Ellevest ticks all those boxes, and offers 1:1 sessions with a team of all-women financial planners for every investing goal and budget.

6. Save for short-term goals.

There are good reasons to prioritize investing vs saving. But let’s say you’re sticking to your financial plan that has you on track to use your savings for a major purchase within the next one to two years — a vacation, a house, a career break. Put your holiday bonus toward your savings goal. For short-term goals, your money is probably better off protected from the potential volatility of the stock market. 

7. Donate it.

You don’t have to give a lot to make a difference. So even if you’ve received an “average holiday bonus,” set it aside for charitable giving. Research suggests that donating money to a good cause or spending it on others can‌ make you feel happier. Plus, making a year-end donation can help reduce your taxable income. Enjoy both benefits. 

Looking for personalized advice on the best way to use your holiday bonus? Book a free 15-minute call with an Ellevest financial planner and feel more confident about your next steps.




Disclosures