Are you expecting a holiday bonus this year? Here's how to make the most of it

If you're expecting a holiday bonus this year, you may already be looking forward to all the ways you can use this windfall of cash. Maybe you're considering going back to school, purchasing a home or taking that long-awaited vacation.

The bottom line is: there are lots of ways you can use your year-end bonus to get the things you want. Below, Select outlines just a few important ways you can put the money to good use. If you're unsure of how to prioritize or divide the money, it always helps to consult with a financial advisor before making a decision.

If you don't yet have an emergency fund (or have one that isn't quite where you want it to be yet), consider using this windfall of cash to build your emergency savings. An emergency fund can help you avoid taking on too much debt to afford large, unexpected expenses like a home repair, medical bill or funeral.

Because of this, it's always important to make sure you have at least three to six months' worth of savings on the sidelines for these unforeseen expenses. It's also prudent, especially now, to have an emergency fund during uncertain economic times.

If you haven't started building your emergency fund yet, it's generally advised to put your money in a high-yield savings account. These accounts, like the Marcus by Goldman Sachs Online Savings Account or the Ally Bank Online Savings Account, typically offer higher interest rates compared to traditional banks, which means your balance grows a little quicker even when you don't contribute anything.

Having a credit card that lets you earn a lot of rewards, like cash back or free travel, is a great financial move if you can manage it. However, all of those savings are basically for nothing if you're carrying a balance and paying high interest fees. Plus, the longer it takes for you to pay off your balance, the more you'll accrue in interest — and the higher your balance might go. This can also lead to a higher credit utilization rate, which can result in a lower credit score.

So, it could be wise to use a portion of your holiday bonus to pay down some of that debt. To make it even easier to pay down your debt, you can also use a balance transfer card, which allows you to move debt from high interest credit card(s) to a new card that offers no interest for an introductory period.

The Citi Simplicity® Card with a 0% intro APR for 21 months on balance transfers from date of first transfer (after, 19.24% - 29.99% variable APR; balance transfers must be completed within four months of account opening).

The Wells Fargo Active Cash® Card offers a 0% intro APR for 15 months from account opening on purchases and qualifying balance transfers. 20.24%, 25.24%, or 29.99% Variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5. This card even offers a welcome bonus: you can earn $200 cash rewards bonus after spending $500 in purchases in the first three months.

Financial advisors typically recommend doing your best to max out your retirement accounts. The idea is that every dollar you contribute today will grow into a lofty balance after being invested for 30-plus years.

And when you consider the fact that retirement accounts, like IRAs, have contribution limits that are use-it-or-lose-it, you won't have the chance to go back and contribute for all the past years you didn't max out your account. Because of this, it's important to try your best to max out your retirement accounts.

According to the IRS, you can contribute up to $22,500 to your 401(k) for 2023. For IRA's, the 2023 contribution limit is $6,500 for individuals under 50 and $7,500 for those 50 or older.

Consider any other big goals you're working toward — like buying a house, going on a vacation, paying for a wedding, etc. Depending on how far off these goals are, you may decide to save or invest the money. Every bit counts and can help you get closer to achieving what you want.

As a reminder, it's generally recommended that you save for big purchases you plan on making that are less than three years away (in a high-yield savings account) and invest for big purchases you plan on making more than three years down the line.

Receiving a year-end holiday bonus can be exciting but it's important to devise a plan for making the most of it. Such a large windfall of cash can be used to reach a variety of financial goals — it mostly depends on where you are in your financial journey and what you'd like to prioritize. If you aren't sure what you should be prioritizing, it always helps to speak with a financial planner.

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