What to Do With a Big Christmas Check-4 Smart Options

Key Takeaways If you receive a holiday bonus or gift money, you may want to put most of it toward long-term financial goals and use a bit to treat yourself, too. Think about how to invest these funds for long-term growth. Even if you can't fully accomplish a financial goal with your year-end check, building some momentum helps. The holiday movie National Lampoon's Christmas Vacation offers a useful reminder about what not to do with a big year-end check. Clark Griswold (Chevy Chase) plans to use his holiday bonus to install a swimming pool-before the money actually arrives. While it all works out in the end, the plan was risky, since he was counting on a windfall to cover a major expense instead of having enough savings to fall back on. If you get a big holiday check, you should devote at least some of it to paying off high-interest debt.SolStock / Getty Images When extra money comes in, it doesn’t have to go toward one big splurge. Treating yourself is fine, but putting most of the money toward your financial priorities can leave you better off in the long run. Why This Matters If used wisely, a big holiday check can be a gift that keeps on giving, rather than a one-time bonus. A pool might sound nice, but it's hard to relax if you're living paycheck to paycheck. You Don’t Have to Pick Just One Way to Use a Big Check First, try not to get overwhelmed with how to best use your big year-end check. You don't have to make an all-or-nothing decision, since you can allocate your new funds across a few different goals. A basic guideline is to use 10-25% of your bonus on splurges. You can then make progress on multiple goals with the rest, even if one check doesn't cover everything. Suppose you receive a $2,000 net bonus. You could put: $200 toward a nice holiday meal out : Treat your family to a memorable experience while still being financially responsible. $500 into an emergency fund : That's not enough for a fully funded emergency fund (which is typically defined as three to six months of expenses), but it's a start. It would also mean you're not one of the 37% of Americans who can't afford to cover a $400 emergency in cash or cash-like funds. $900 toward credit card debt : This might just help you pay off one card, so you can build momentum with the debt snowball method. $400 toward retirement savings : You can start building a retirement savings habit while potentially qualifying for a tax break . This is just one example-there are countless ways you could spend your end-of-the-year money. Spreading your check around could be more motivating for some while others may want to put everything toward one goal. Save It Where It Can Actually Grow If you want to put some or all of your big holiday check toward savings, don't mindlessly deposit the money....

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