The holiday season inspires the spirit of giving in all of us. Sometimes that means we find ourselves with unexpected cash this time of year. Maybe your employer rewarded your hard work with a special year-end bonus. Or, perhaps a relative sent you a surprise cash gift for the holidays.
If you received some extra money this holiday season, you might be wondering what to do with it. It's tempting to celebrate with a shopping spree, but before you do, take a moment to think about how that cash could help you reach your financial goals.
If you're looking for ideas, here are a few ways to put your holiday cash or bonus to good use:
Use it to get ahead of debt
Make the most of your holiday windfall by using it to pay down some of your debt. Not only will it take a weight off your shoulders, but it may also reduce your monthly payments.
Save it for a rainy day
An unexpected cash windfall can be just what you need to start or build up your emergency fund. Ideally, you should have at least $1,000 set aside in a starter emergency fund. If you have this amount saved, WPCU recommends building your emergency fund up to cover three to six months of living expenses. Keep your emergency fund in a high-yield savings account, where it can continue to grow until you need it.
Invest in yourself
It's never too soon to start getting ready for retirement. Consider putting a portion of your holiday bonus into your 401(k) or IRA. Remember, the earlier you save for retirement, the more time your money will have to grow. Start now, and you'll thank yourself later!
Another way to invest in your future self is by using your holiday bonus to further your education or career. Earning a professional certification, taking an online class or attending a leadership seminar will enhance your skills and may even help you move up in your career.
Leave some for fun
It's perfectly fine to use part of your holiday bonus as “fun money." Set a percentage aside to treat yourself to a small indulgence, like a nice dinner or a massage. Or, maybe you have something specific in mind that you're saving for, like a family vacation.
When you receive a cash windfall, it's natural to want to spend at least part of it right away. That's why some people follow the 80/20 rule, which involves putting 80 percent of your extra cash towards a financial goal and spending the remaining 20 percent on anything you want. It's a great way to enjoy the financial flexibility and freedom that comes with having some extra money in your pocket!
At Wright-Patt Credit Union, we want to help you Save Better, Borrow Smarter and Learn a Lot all year round. For more ways to make the most of your hard-earned money, check out our helpful online resources such as videos, interactive learning modules and financial calculators.