Contributed  by Leonard F.

A year-end bonus is a great windfall.  I am sure that you earned it by working hard so now you want to reward yourself.  But rewarding yourself with a trip to the mall may not be the answer.  Why not think back towards your past new year’s resolution?  Did you make a financial goal?

Maybe 2011 was the year you wanted to pay off your debt, put money into retirement or build up your emergency savings.  How close did you come to these goals?  We often start strong in the beginning of the year and then drop back into our old habits.  The point of this exercise is not to chastise you or beat you up.  Even the best plans can be interrupted.  The important thing is to leave it in the past, forgive yourself and move forward.

How far did you make it?  Were you able to put some money towards retirement but not the full amount allowed to you?  Congratulate yourself on how far you have come.  It is better to concentrate on how far you have gone than to chastise yourself for the distance you have left.

If you were unable to achieve your goals, ask yourself why.  Did you overspend? Were there some emergencies that you didn’t expect? Knowing why can help you get back on track for next year. You can always continue your goal into the next year.

You can take your year-end bonus and put it towards your past goal.  Here are some ideas:

  • Deposit it in your savings account until you know what you want to do with it.  If you put it into your checking account and leave it there, it will be eaten up slowly by small purchases—in my case, lattes and sandwiches.
  • Put it towards your credit card debt.  You are losing money due to interest rates.
  • Put it towards your emergency savings or your retirement fund.
  • Take 10-20% and use towards something fun that you will enjoy and get value from.

What will you do with your year-end bonus?