What did you do with your bonus last year?
Do you remember?
You worked hard for it.
Maybe even earned it with blood, sweat, and tears.
But did that money change your life?
Or even shift the direction you’re headed?
I’m guessing probably not.
BTW, it’s Katie writing to you today — and while I may be a newer addition to the team, I’ve had plenty of conversations with friends (and my husband) around bonuses.
I’ve seen people make common mistakes when they get a bonus*.
They’re not egregious errors.
They’re not taking the whole thing to Vegas for an unforgettable (un-rememberable?) weekend.
Nah, they’re just making small, human mistakes that add up.
Here’s what I see most often.
1. Spending It Before It’s Real
Hands-down, the favorite Christmas movie in our house is National Lampoon’s Christmas Vacation. If you’ve seen it, remember Clark Griswold planning to put in a pool with his bonus check.
Only problem? The bonus check that he’s come to expect turns into a Jelly of the Month Club membership (“the gift that keeps on giving”).
It’s only funny because it’s happening to someone else.
Bonuses often feel predictable. Expected.
They’ve come before.
You may even know roughly what the number will be.
But they are never guaranteed.
Markets shift.
Companies adjust.
Revenue dips.
Compensation structures change.
The most subtle (and potentially devastating) mistake is structuring your spending around a bonus before it’s yours. What should have been extra income can actually turn into debt.
A bonus should strengthen your plan.
It should never be required for it.
2. Letting Lifestyle Absorb It
This one is so tricky because the money just kinda… disappears.
It might be that you deposit it and then simply live your life.
It’s not earmarked for anything special.
It’s groceries and kids’ activities.
A month later, you don’t feel any different.
No big savings and no big celebration.
The worst of both worlds.
Or maybe you just start saying “yes” more often.
No single extravagant purchase.
Just a couple more subscriptions.
The upgrade on vacation.
Make a few home updates.
Six months later, nothing feels more secure — just more expensive. And the bonus is all spent.
3. Ignoring Expensive Debt
Paying off high-interest debt probably isn’t the first thing you think about when you get a bonus, is it?
Let’s be honest, it is NOT the sexy choice.
No Instagram-worthy photos or awesome memories.
But ignoring that expensive debt will increasingly take away your flexibility.
Credit card interest compounds.
Monthly payments linger.
The mental load builds.
I’ve seen people pay for a fancy night out with a credit card costing them double-digit interest on the balance.
What if your bonus was leverage, instead?
Used wisely, it can eliminate pressure that’s been living rent-free in your head for years.
Used reactively, that opportunity disappears.
4. Missing the Long-Term Window
It’s easy to think about your bonus like a double-espresso, or a sugar high.
It can feel like a shot of adrenaline to your bank account.
(But we all know about the crash that follows.)
Instead, a bonus can be one of the clearest chances you get to propel your life forward.
Since it’s separate from your regular paycheck, your bonus is psychologically easier to be strategic with. It’s almost like it was never there, so you don’t miss it leaving your checking account.
Maxing retirement accounts.
Funding an IRA.
Adding to a brokerage account.
Catching up after a year that fell short.
These moves don’t create instant gratification.
They create options.
Options to change careers.
Reduce pressure.
Retire on your terms.
As Michael refers to it, they build your “OS” fund.
So, if your bonus doesn’t move you closer to freedom, think twice.
5. Forgetting About Taxes
This one gets people every year.
Especially if the bonus is bigger than last year.
Bonuses are typically withheld at a flat rate (25%).
Problem is, your actual tax bracket could be higher than that.
Meaning, if you’re a higher earner (or live in a high-tax state like my time in New York and Illinois) you may owe more than what was withheld.
If you spend what was deposited without running the numbers, you could be stuck with a surprise tax bill.
Not only does that take the joy out of whatever you did with it, it adds unnecessary stress.
And stress, more than anything, is what we’re trying to avoid.
When you step back, most of these mistakes have something in common:
They’re about expansion.
Making life bigger.
Spending first.
Assuming more.
It’s easy to believe that’s what success looks like.
Bigger. Better. Faster.
Bonus season feeds that instinct.
But after a few dozen trips around the sun, I can see success differently.
Smaller (less overwhelming).
Clearer (more focused).
More intentional (fueling purpose).
Sometimes the best use of a bonus isn’t to add something.
It’s to remove something.
Debt.
Pressure.
Financial fragility.
The need to perform at the same intensity next year.
What if your bonus didn’t make life bigger?
What if it made life steadier?
Again, perhaps not the most exciting.
But maybe the most fulfilling.
Here’s the simple framework we encourage clients to follow:
- Plan for taxes.
- Eliminate expensive debt.
- Build or replenish reserves.
- Invest for the future.
- Celebrate intentionally.
Notice that the celebration isn’t removed.
It’s just that the tail isn’t wagging the dog anymore.
A bonus isn’t just extra income.
It’s a decision point.
So, this bonus season, I invite you to pause.
Plan first.
Then enjoy the calm that follows.
— Katie
* This also applies to those who have historically gotten a big tax refund. We don’t recommend it, but the advice on what to do with the money stands.
