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You have your bonus, here's how to make it work for you

Even if you're not a Powerball winner, a wealthier 2016 may happen early as last year's bonuses are paid out and tax refunds start flowing.

"It's typically this time of year when bonuses are coming around, that you can do some housekeeping and clean up the balance sheet," said Jenifer Aronson, a chartered financial analyst and managing partner of Mosaic Fi in Lincolnshire, Ill. "It's a nice problem to have."

Bonus expectations vary widely. The average company bonus is $858, a figure that jumps to $1,072 among companies with 500 or more employees, according to a report from Accounting Principals, a financial services recruitment and placement firm.

Wall Street bonuses are the outliers, with a report from the New York State comptroller's office putting the average last year at $172,860.

(Not in the bonus pool? Tax season opens Jan. 19, with a flood of tax refunds not far behind. During the 2014 filing season, nearly three-quarters of federal returns processed resulted in a refund. The average amount: $2,785.)

Pause before you start making plans to make use of such a lump sum. The amount of a bonus and its timing often aren't set in stone, for example, so it's not smart to take action until you actually have the cash in hand, said certified financial planner Clark Randall, owner of Financial Enlightenment in Dallas.

Early expectations are that Wall Street bonuses will fall. A fall report from Johnson Associates anticipated financial industry bonuses will fall 5 to 10 percent, while The Wall Street Journal reported last week that Citigroup, J.P. Morgan Chase, Morgan Stanley and Goldman Sachs are expected to have flat or smaller bonus pools, compared with last year.

Once you have the money in hand, it's time to figure out your budget. "You don't have 100 percent of that money to work with," Clark said. "Most likely, you're going to have to pay taxes on it."

Allocate for that at the outset to avoid coming up short at tax time. For a bonus, talk to your human resources department to make sure you aren't over- or under-withholding, said Shannon Eusey, president of Beacon Pointe Advisors in Newport Beach, Calif.

After taxes, the right strategy will depend on your overall financial situation. Companies have been shifting to a variable compensation model that favors bonuses over raises, and some for some workers, bonuses and commissions are regular, expected occurrences that account for a significant portion of their annual income.

"If the client is looking at this bonus as, well, I need to live off it over the next year, that's a very different situation," said Aronson. In that case, she said, that cash is best kept out of the market so it's available for those ongoing bills. It's also more important for such workers to have a plan in place to make the most of bonus money.

When the lump sum is more of a windfall, look first to fixing vulnerabilities. First up: Knock out high-rate consumer credit card debt. It's a great return on your investment, said Howard, because you're avoiding double-digit interest rates.

"Having debt keeps you from doing so many other things properly," he said.

Building up an emergency fund is another smart safeguard. Just 37 percent of Americans have enough savings banked to fully cover an unexpected expense like a $500 car repair or $1,000 emergency room bill, according to a new Bankrate.com survey of 1,000 adults. How much to set aside is a moving target; advisors often recommend setting aside three to six months of expenses.

Then it's time to look ahead to other goals, such as retirement and college savings. "If you have the ability to invest those funds, invest those funds," said Eusey. Aim to max out tax-advantaged accounts including 401(k)s and IRAs before putting money in brokerage accounts.

Check your employer's policy before making a big contribution to your 401(k), Eusey said.

"Some employers will not continue to match, once you max out," she said—meaning you'll lose out on valuable free cash for the rest of 2016.

It's also smart to consider whether you want to make one big contribution or scale in over time. TIAA-CREF found that lump-sum investing beats dollar-cost averaging most of the time, but Aronson points out it may be psychologically damaging to see your big windfall take a sharp decline should the market turn shortly after you invest.

Whether the windfall is large or small, advisors agree that a splurge is an important component. Spending 10 percent is reasonable, said Clark, and up to 25 percent may be warranted if the rest of your financial house is in order.

"Otherwise, it's like it never existed," Aronson said. Most bonuses are performance based, so it's fair to actually reward yourself for that hard work.

"I'm a firm believer that we should enjoy our money," she said.