What to do with your end of year bonus
Canadians of a certain age will remember Clark Griswold fantasizing about the pool he plans to install using the money he expects to receive as a Christmas bonus in National Lampoon’s Christmas Vacation. Spoiler alert, for those who haven’t seen it: Instead of a hefty cash bonus, he receives a subscription to a jelly of the month club. Disappointed, what ensues is a breakdown of epic proportions that involves a kidnapping.
If you’re luckier than Clark Griswold, you might be on the receiving end of a monetary Christmas bonus. You’d also in the minority: While 54% of Canadians would like an end of year bonus, only 15% expect to receive one this year, according to a study by ADP Canada.
So, what should you do with your bonus if you do, in fact, receive one this year?
Well, there’s no shortage of options. Here are a few.
Pay down debt
More than one-third of Canadians have made paying off debt a financial goal for 2025, according to Ratehub.ca’s 2024 consumer survey. This comes at a time when consumers are taking on increasing amounts of debt, especially credit card debt.
Nearly 13 per cent of survey respondents have delayed paying off debt or taken on new debt despite higher interest rates.
And that’s a stressful way to start the New Year.
So, you could do yourself a favour and alleviate some of that stress by earmarking your bonus for debt repayment.
Also read: What happens if I only make the minimum payment on my credit card?
Save or invest it
If you’re one of those who has an easier time budgeting for the holidays, you might get through the season unscathed – from a debt perspective, at least.
If that’s the case, you could do worse than put that money toward the future. Say your bonus is $1,000. As an example, if you’re 25 and plan on retiring at 65, that relatively modest amount could be worth $7,039.99 by the time you retire (assuming a 40 year time horizon and a return rate of 5%). The best way to start investing is through your tax-free savings account (TFSA).
Another alternative is to boost your emergency fund. Do you have 4-6 months worth of expenses saved up in a liquid savings account? If not, you may want to earmark your bonus for that.
Treat yourself
Look, it’s been a long year and we’ve all worked hard. Sometimes it’s nice to splurge on ourselves in a guilt-free way.
If you’ve diligently saved over the past year and have taken care of all your debts, why not treat yourself or your loved ones? It might be just the thing you need to get back to working hard in 2020.
What not to do
Whatever you do, don’t spend money before you receive it. Remember the aforementioned Griswold? Assuming he was in line for a bonus, he spent it before receiving it, on a down payment for the pool.
And you know what they say about assumptions. Lucky for him, it all ended up OK, thanks to some Christmas spirit from his boss’ wife. But you might not be so lucky.
So, whatever you do, make sure the bonus cheque clears before you put your own down payment on a pool (or car, or house, or whatever else).
The bottom line
If you’re one of the fortunate ones to receive a bonus this year, enjoy it. Do whatever you feel is best for yourself now – and in the future.
Give it some serious thought so you know you’re making the right choice. Hey, maybe it’s a combination of all three of our suggestions.
And let us know in the comments what you plan to do with your end of year bonus.