5 concepts for budgeting your vacation or Christmas bonus

The holidays can be a financially exhausting time, but a bright spot in the dark of winter is when you are given cold, hard money.

It could be the dollar bills your mother still puts in your Christmas card, even though you have not reached adulthood. Or maybe it's the holiday tips you receive, or the end-of-year bonus that you've always been looking forward to.

Whatever your monetary pleasure, we know you really appreciate it. However, before you spend this money lightly, here are five financially responsible suggestions on how you can handle your holiday pay.

1. Build up your emergency fund

If you belong to the millions of Americans who have none emergency fundsIt would be wise to save some of your bonus money for a rainy day. An unexpected issue, such as a car repair or a hospital bill, can result in you turning to credit cards or loans when you have no savings.

While many financial experts recommend a livelihood of three to six months in an emergency fund, others suggest you do not need so much, We will not argue about the crowd here. Just know that it's always better to have something saved than nothing.

2. Reduce your debt

With all these gifts, it is easy at this time of the year to absorb additional debts from consumers. Even if you could avoid that (yes!), Your additional holiday allowance could help reduce your existing debt burden. We look at you, student loan.

Use the money to settle your smallest debt if you are a fan of Snowball methodor pay off your debts with the highest interest rate if you follow the instructions avalanche method,

3. Add your retirement plan

Too often, we only think about retirement when we approach our '60s. Earlier financing of retirement accounts, however, means that you benefit more from compound interest.

Run your extra vacation proceeds on your retirement accounts before you start dreaming of all the stuff you want to buy.

If you're trying to maximize your retirement savings this year, the 401 (k) contribution limits For 2019, $ 19,000 is for people under 50 years, or $ 25,000 for those over 50 years old. The Roth IRA limit for 2019 is $ 6,000 for persons under the age of 50 or $ 7,000 for persons over the age of 50.

4. Pay an annual bill

It's crazy how it feels to pay a big bill when you're adulthood.

If you save the money for your annual car insurance, your child's summer course, or another large annual expense, you no longer have to struggle to get the money together when it's due.

If you do not have enough to pay the entire bill, you can declining fund – Savings that you increase regularly until you have the money you need.

5. Invest in yourself

If you are looking for a way to use your holiday bonus, this is indeed the case funThe following: Use your extra money to do something good for you – something that has a positive effect on your life.

Maybe there is an online course to help you with your career advancement. Maybe you have one Business idea that wanted to get you started, Or you want to hire a personal trainer or achieve another personal development goal.

Do not wait until the new year. Invest your holiday money to finally realize it.

Nicole Dow is a senior writer with The Penny Hoarder.

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