How to survive the holiday season without going broke
When Julia Faletski landed her first holiday bonus, the then-bank worker felt a wave of excitement because of her job well done.
But then came some more work -- figuring out how to make the most of that bonus.
Some experts believe holiday bonuses have been declining since the 2008 recession, but banks, tech companies, law firms and other large organizations are still known to hand them out.
This year, 64 per cent of Canadian employers said they will reward staff with a year-end bonus, according to a survey of 600 senior managers and 500 workers commissioned by recruitment firm Robert Half.
Faletski, now a Vancouver-based certified financial planner with online investing service WealthBar, says the biggest mistake people make with their holiday bonus is an impulse decision.
"It's really easy to say that, 'I earned this, it's just bonus money and I can go out and do whatever I want with it and perhaps spend the whole thing on just treating myself,' but unfortunately, what can happen that way is you're setting yourself up for a much more difficult year ahead," she says.
Anyone who receives a holiday bonus should plan ahead and think of expenses they will incur or ones they are already grappling with, Faletski says.
She recommends paying off debt first, starting with whatever has the highest interest. For most people, Faletski says that is credit card debt. Then tackle mortgages or student loans.
If your bonus covers all your debt and there's still money to spare or if you are lucky enough not owe any money in the first place, she advises people to think about taxes.
"If it looks like I might be owing some tax, I would be looking at contributing money to a registered retirement savings plan (RRSP) account because that's just a way to alleviate stress and reduce the amount that you have to pay later on," she says.
RRSPs can be beneficial because taxes on your contributions to such accounts are deferred until retirement.
You could also stash some of your bonus money in a tax-free savings account because it "just grows the amount you have even more," Faletski says.
Faletski knows paying off debt or squirrelling money away might lack the excitement of a new pair of shoes or a fancy night out, but says being prudent doesn't mean you can't treat yourself at all.
"The last time I received my bonus I was working really hard at keeping my credit cards paid down and contributing money to investments, so I decided this time around I'm actually going to treat myself and my boyfriend at the time to a trip away," she says.
"That was his Christmas present and I'm so glad that I did that because he actually ended up proposing to me...so spending on things like that can have a time and place as well."