How much to save from your Christmas bonus? It depends a lot depending on your priorities.
The Christmas bonus is sometimes called a “13-month salary” and is given to workers at the end of the year. This depends on how big the company is, how much money it has, and how well it is doing financially, but the average holiday bonus is said to be around $1,800. The range could be anywhere from $100 to $5,000.
Each person who receives it gives it a specific destination according to his or her goals, needs, plans or desires.
The use of the Christmas bonus, whether spending, saving or investment, should respond to a general strategy of personal or family financial planning that prioritizes the elimination of debt, encourages savings and provides the best conditions for housing, food, health and education.
If you know your strategy, you can calculate how much to save from each salary, bonus, commission, or Christmas bonus.
In fact, long before you receive your Christmas bonus, you will know what you will do with it and in what percentages.
Do most people get Christmas bonuses?
Christmas bonuses are becoming more common, and few companies offer holiday bonuses that aren’t tied to performance.
Christmas bonuses for contract workers depend a lot on how long the contract is. When a contract says that employees will get bonuses if they meet certain goals, they should get paid when they do, unless they agree to change their rights to get the incentive or agree to only get a part of it.
In many countries, there are similar policies according to which extraordinary payments are made at the end of the year. This is an employer’s savings assistance for employees who do not have the order or discipline to take charge of their financial life.
The fact that you are reading this article shows that you have an interest and are willing to take action to understand your finances, organize them and meet your goals. Since this is most likely the case for you, there is no need for your employer to organize how much you should save, spend or invest.
You know that the bonus is a way of distributing the salary you receive, but how you use it is entirely your responsibility.
What should I do with my Christmas bonus?
It depends on what your objectives or goals are. The following are some ideas of possible objectives:
I want to get out of debt
There are structured and proven methods for years, such as the so-called “snowball”. To learn more about this and other methods we invite you to read our article “How to get out of debt“.
Generally speaking, if your goal is to get out of debt, the idea is to initially allocate your available cash flow to establish an emergency fund to cover 3 to 6 months of expenses.
After you have your emergency fund, you will prepay your debts in order of balance.
In conclusion, if your current objective is to get out of debt, you will allocate 100% of your Christmas bonus to prepay them, shortening the time it will take you to pay them all.
I want to retire (retire, retire) early
Maybe you never got into debt, or you have already managed to get out of debt and your dream is to retire early. If you read our article “How much should I save for retirement“, you will see that the time you have left to retire depends mainly on your monthly savings (as a percentage of your income).
The Christmas bonus is a wonderful opportunity to get you closer to that exciting goal of early retirement.
To give you an idea, the following table shows the number of years you have left to retire based on the percentage of savings you are willing to make.
| % savings on net income | Years for self-retirement |
| 35 | 25 |
| 40 | 22 |
| 45 | 19 |
| 50 | 17 |
| 55 | 14,5 |
| 60 | 12,5 |
| 65 | 10,5 |
| 70 | 8,5 |
| 75 | 7 |
| 80 | 5,5 |
| 85 | 4 |
| 90 | less than 3 |
| 95 | less than 2 |
I have no objectives or goals
If you have no goals or objectives, don’t worry. Most people live this way. However, there are many reasons why it pays to have goals in life, especially to know what we want and to achieve it.
In other words, people who have goals generally get what they want. Those who don’t have goals get what they get.
If you are happy with what life has given you so far, and you are content to stay that way, it may not even be necessary to go to the trouble of setting goals, making plans and following up on their execution.
On the other hand, if you feel that life has much more to give you, and you want better health, more abundance, and stronger and better quality relationships, adopting a method to define everything you want through goals is a great decision.
To learn more about the topic of goals and objectives, we invite you to read our article “How to achieve your goals“.
The 50/20/30 rule
Lately, the 50/20/30 rule is very fashionable on Pinterest and other networks. According to this rule, 50% should be for your expenses, 20% for your savings and 30% for your personal expenses. It is not very clear why these percentages are better than others, say 40/40/20 or 30/30/40.
This type of rule can work for people who do not have clear objectives.
For those who do not know where they are going, any wind is good.
For this reason, at income-blog.com we do not use or disclose rules or methods unless they have a firm basis.
Conclusion on how much to save from your Christmas bonus, according to your goals
If your goal is to get out of debt quickly, use your Christmas bonus to prepay loans. If your goal is to retire early, allocate 80% of your Christmas bonus to savings and 20% to financial education to improve the return you get from your savings.