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1. Start (or contribute more to) a financial freedom fund.
It is a good practice to have at least six to eight months’ worth of expenses in a high-yield savings/checking account as an emergency fund or, as I like to call it, a Financial Lifestyle Freedom Fund. Use your bonus as an opportunity to either start your own financial lifestyle freedom fund or put more into one you already have in place. Having this money in an account will help you weather most financial storms and/or give you the strength/courage to walk away from a toxic working environment.
2. Put more money into your 401(k).
As we know, a well-structured 401(k) is a solid way to save for retirement. Even more so, if your employer provides a matching program, it gives you even more of a reason to start participating. Your bonus can give you the cash flow you need to increase your 401(k) contributions. While tax laws may not allow you to deposit your bonus into your 401(k) directly, having access to the extra cash will allow you to increase what you normally contribute from your check without the fear of not having enough money to meet your budget.
3. Fund a college savings account for your child/children
If you have children and haven’t started a college savings account for them already, this is a great way to get a head start in the college planning process. Starting and funding a 529 savings plan for your children really allows the money to grow tax-free for their education. You would be surprised at how much you can put away using this lifestyle tool..