More and more lucky workers have the opportunity to really brighten their financial pictures in 2016: They're getting year-end bonuses.
Three-quarters of companies plan to give employees a cash bonus this year, up from 67 percent last year, according to a report from staffing firm Accounting Principals.
While it may be tempting to treat yourself and blow it all on something fun, you can use the extra income in better ways to maximize the value of your bonus.
"Targeting a big whack of money towards a single goal — like paying down debt, a vacation, retirement — will be more gratifying than the drip, drip of steady saving," said Meg Bartelt, a financial planner and founder of Flow Financial Planning in Bellingham, Washington. "So don't squander the opportunity."
Bartelt recommends first using your windfall to tackle credit-card debt. Not only will you enjoy the budgetary and psychological relief of clearing or chipping away at a balance, you can also save big on interest-rate charges.
Next, Bartelt suggests fully stocking your emergency fund, which can prevent you from digging yourself into more debt, if an unexpected cost were to come up. You want to have at least three months' worth of cash to cover necessary expenses.
Depending on your personal situation and risk tolerance, you may want to save even more. For example, if you have an unsteady income or you're unsure of your employment status, having more money on hand — up to a year's worth of costs, if you can manage it — is a good idea.
You might also want to beef up your emergency fund if the current state of financial markets and the economy makes you queasy.
"More savings — and less spending — in general gives you more money, and money gives you power and flexibility," said Bartelt. "If you're feeling afraid and uncertain, power and flexibility are likely a good antidote."