Have You Stupidly Spent Your Christmas Bonus?

December 21, 2010 by  
Filed under Fools of Finance

Let’s assume that you are fortunate enough to receive a year-end or Christmas bonus. Have you spent it? Or worse, did you spend it in anticipation of receiving it, like Clark Griswold did?

I first wrote on the subject of Christmas bonuses two years ago, when the economic collapse was starting to peak. I didn’t think you should spend it then. I don’t think you should spend it now. Save it for something important, such as a real emergency fund for use in a real economic emergency. Buying yourself a Christmas present does not qualify.

I used to receive discretionary year end bonuses, before I became a business owner. One year I took my largest bonus ever and drove directly to a car dealership. I used a big chunk of my bonus to lease a new car. That was stupid. Unfortunately, I was half-drunk on Christmas cheer acquired at our over-the-top office party. This made it even easier to make a stupid buying decision. I kept that car for a long time but I didn’t need to lease it. The car I was driving was junk so I needed another car.  But, I should have purchased a used car.

Boy, was I a Fool of Finance. That never happened again.

Bonuses can make you financially stupid. Christmas spirit (or spirits) can make you stupid.  Do not succumb to this. You should put your bonus money directly in a savings account and forget about it until tax time. Then do something wise with it.

Merry Christmas from someone who learned his lesson.

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4 Responses to “Have You Stupidly Spent Your Christmas Bonus?”
  1. MasterPo says:

    No bonus this year. But if I did I would probably bank it.

    My wife may get a bonus. Didn’t last year but has up until now. If that comes through we’ll put it towards retiring debt.

  2. Adam says:

    I treat my bonus as just that, a bonus. I spend it on things that I don’t normally buy due to my budget, i.e. I spend it by splurging on myself.

    I carry no debt, I have my retirement savings plans fully funded, and I already have an emergency fund.

    Any monetary company bonus is a nice way to reward myself without altering my normal budgeting. Of course, my company also makes discretionary 401(k) contributions based on company performance rather than individual merit, which I don’t cash out if I receive one (there isn’t one this year).

    Obviously if I wasn’t financially secure then I would save it, but I base all my financial planning around not receiving a bonus, so if I get one, then it’s essentially a small windfall that I can spend as I like.

  3. Debbie M says:

    I got a bonus for the first time this year. The bosses knew they could afford to give us a raise this year, but not keep paying that raise next year (the state has already said they’re cutting our funding even more), so it’s really a temporary raise.

    So I treated part of it like I do for raises–I contributed 10% of it to charity and I added (a randomly chosen 3%) inflation rate to all my savings, thus paying an extra 3% of my usual monthly deposit times 12 months. Then I used the rest to pre-pay my mortgage. Since my house will now be paid off in 1.5 years, it was sort of like buying a 1.5 year CD with a 5.6% interest rate.

  4. Glen says:

    My first paycheck in Jan I will get $50000. Taxes will take $15100. Then I will have $5500 deducted for my 401(k) – 11%, $4050 into HSA. save $5000. The rest will be used for Travel and spurges,and a few house and cabin fix up expenses…maybe save whatever is left over.

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