Go-to tips to avoid impulsive spending when you get an extra payment from work. 

Do one thing: Don’t forget the taxes. Most bonuses are taxed. So, depending on where you live – and if you pay both federal and state income taxes – that potential $2,500 bonus could shrink to about $1,600 before it ever lands in your bank account. 

Managing Work Bonuses 

If you are among those who receive an end-of-the-year (or even a beginning of the year) bonus, congratulations! Not everyone is fortunate enough to have some extra funds dropped into their checking account this time of year. In fact, research shows that only about 40% of U.S. workers will likely qualify for some kind of monetary work bonus this year. 

Bonus Considerations

So if you are getting a one-time pay bump, count yourself lucky for earning some extra money this year. And before you make plans for the additional cash – or even if you already have some ideas – take a few minutes to consider all the ways you can strengthen your financial future by making the bonus work even harder for you – instead of blowing it on something you may not really need. 

Why the Guidance?

Humans are basically wired to spend. Science shows us that we are creatures of impulse, and it just feels better to plunk down your cash (or plastic) and receive something – and get a hit of dopamine in our brains – than it does to save money for the future or an emergency.  

District Capital Management financial planner and managing partner Alvin Carlos, CFA, CFP, has a few suggestions for financially savvy ways to handle a bonus before you blow it.

Spend a Little Now 

Many financial experts say you can give yourself at least a small reward with your bonus. Depending on the size of the bump, Carlos says you can:

  • Use 20% to treat yourself to a nice dinner or holiday getaway, guilt-free.
  • Move the rest of the bonus money out of your main checking account so you won’t be tempted to spend it.
  • Money that you have easy access can quickly vanish into thin air.  

Determine Your Highest Financial Priority

After you use a small portion of your bonus on something that makes you happy, take a look at your other pressing financial needs. Carlos says, deploy the other 80% of your extra funds toward your highest money priority. That could include any of the following:

Pay Off High-Interest Credit Card Debt

If you have a mountain of high-interest credit card debt, it’s smart to work to pay those balances down for a couple of reasons.

  • Additional Bonus. When you use your bonus to lower balances on credit cards or high-rate loans, you are in effect giving yourself a return equal to the interest you will no longer be paying.
  • Interest Savings. With the average interest rate on existing credit card balances hovering at about 22.83% APR in December 2025, you could potentially save quite a bit when you knock down or pay off an existing balance.

Build an Emergency Fund

This is no time to be without a cash cushion in case something unexpected happens. And trust me, it’s not if, but when you will unexpectedly need money for an emergency.

  • Debt Avoidance. The good thing about having a separate savings account in case of emergencies is that you can use it to pay for the bill you didn’t plan on instead of reaching for high-interest credit cards and putting yourself into debt or deeper into debt.
  • Separate Savings. The best way to do this is to set up a separate high-yield savings account and move your bonus there. Moving forward, set up an automatic deduction from your paycheck as often as you are paid to build up the emergency fund even more.

Catch Up On Retirement

Now is a great time to play catch-up on the retirement front, if needed. That’s because contribution limits for retirement accounts increased in 2025, which means you may be able to shelter more money from taxes than you realize.

  • Redirect to 401(k). So, if your employer plan allows it, direct part of your bonus into retirement contributions to boost savings and (another bonus) get tax advantages.
  • Add to IRA. If you don’t have a work-based retirement plan, you can use the funds to complete your IRA deposit for 2025 or get a head start on 2026. The deadline’s not til tax time.

Save For A Down Payment

Even as interest rates drop, buying a home will likely be one of the biggest expenses most people will ever have. With good reason. The median sales price of existing homes in the U.S. was about $433,175 in November 2025, according to Redfin housing market data. With prices that high, you will need to save every extra bit of money you can for your house down payment fund to help.

Make Headway On Your Child’s 529

Most states allow you to take a tax deduction each year for contributing to a state-sponsored college savings plan, which is why now is the time to boost your 529 contributions, if needed.

  • 529 Tax Benefits. Generally, you must contribute to the plan of the state where you claim residency to qualify for this. Plus, your contributions grow tax-free. Even better, they can be withdrawn without paying any extra taxes as long as these funds are used for qualified educational purposes. And, if your child doesn’t go to college, you can eventually transfer up to $35,000 into a Roth IRA to jumpstart their future.