Most companies will give their staff a bonus at the end of the financial year. For many people, the first thought they have is to spend it on something they thought they could never have afforded otherwise. Women may go for a great pair of heels or a very expensive handbag, while men may spend it on big electronic equipment.

One thing you shouldn't do is rack up your credit by overspending in advance, anticipating that you'll pay it off with the bonus. You may end up just accumulating more debt. Never spend money in advance. Additionally, do not use the bonus to treat your family members and friends to expensive and extravagant gifts; this may end up messing up your finances. The bonus is subject to tax so which you will have to pay later.


Don’t spend it on electronics, handbags, clothing, etc. There are more important things to spend the money on, as you shall see below. The best thing to spend your annual bonus on are loans and bills settlements. However, there are so many other ways you can spend your bonus. To ensure you don't have regrets when it's over, it's good to have plan for how you will use your bonus.

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Did You Just Recieve Your Bonus?

When you receive your bonus this is what you should do.

  • Treat the bonus like a paycheck and not a jackpot. The best thing to do is to see it as just another paycheck, not free money because the latter will make you spend it in the wrong way. Money that you receive unexpectedly ends up being misused. Let this be just another month that you have received your salary and treat it as such.
  • Make a budget and plan for it. It's important to budget for the bonus the same way you budget for your paycheck to ensure you don’t spend it in the wrong way. Not having a budget will lead to a lack of discipline and impulse buying.
  • Remove it from your account. Another good way to ensure you don’t overspend the bonus is to transfer the money from your checking account to your savings account, or an account you don’t have access to on a daily basis.

How To Spend It Wisely

These are our tips for spending your annual bonus in a productive and effective way.


Pay Off A Loan

If you have a loan that you pay towards each month, this would be a great time to get ahead of the game and reduce your monthly expenses. Prioritize your bonus by clearing a loan that may have just a few months left. If it’s a big loan, you could settle part of the principal amount.

This will greatly reduce the amount of interest that you pay each month, hence reducing the installments. Student loans that have previously gone unpaid, can perfectly be cleared with this bonus.

Pay Your Pending Bills

This is a great way to use any extra money you receive. Bills must be paid eventually, no matter how long you delay them. So, the best thing to do with the money you weren't expecting is to clear any bills that may be outstanding. This will not only give you peace of mind but also enable you to improve your credit score.


Save The Money

We all have a savings account, and if you don’t have one, this would be a great way to start saving. Let your bonus boost your savings account. When an emergency arises, you will be grateful that you actually saved. For a single person looking to make a big investment in the future, a savings account can also come in handy as a down payment for a house or to buy a car.

If you are also planning to have kids in the future, don’t overspend your money on things you don’t need. Kids are very expensive and you need to plan for them early. A good way to start is to keep some money aside for when the kids actually come.

Invest The Money

A great way to spend a bonus would be to invest it. This can be a perfect way to create an investment portfolio. You can buy stock, invest in bonds, etc. However, always take time and speak to a professional in finance for advice to avoid making mistakes that can lead to the loss of money.

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Overall, it's important to ensure that you spend your money wisely. However, if you feel like you need to treat yourself after a year of hard work, you can spend 20% of the bonus on spoiling yourself. But make sure that you use the rest of the money in one of the ways be mentioned above.