Smart Ways to Spend Your Bonus Money

There may be a lot of economic uncertainty out there but it appears quite a few Canadians are sure of one thing -- they're still expecting to get their annual bonus.

A recent poll suggests that one third of Canadians in the workforce expect to get their year-end bonus which usually arrives by the end of February. It seems that those anticipating the reward also have high expectations when it comes to how much they'll receive -- 79 per cent of respondents who said they think they'll get a bonus said they expect it to be the same amount as last year or higher.
With so many people in the Canadian workforce anticipating a large chunk of cash from their employer, it begs asking what people will spend it on. Well, the survey asked that too and it seems Canadians have the paying down of debt on their minds -- 53 per cent of Canadian respondents who are eligible for a bonus said they will use it towards paying off household debt while only 17 per cent said they will treat themselves to a consumer purchase.
No matter where the money ends up though, it's important to have a designation for it so it doesn't become mixed in with everyday spending.
Here are some savvy ways to take advantage of a reasonably large chunk of income.

1. Paying down debt
Canadians are right to have debt on the brain.
The average interest rate for a credit card is between 18 and 20 percent. If you don't have to, why are you paying that? There's no investment that's going to pay you 19.5 per cent, so get rid of high interest credit card debt and use the monthly payments you would otherwise be spending towards that debt for savings or investments.

2. Put the amount into a TFSA or an RRSP
if you want to save some money but have a limited emergency reserve or are saving towards something specific like home improvement, a TFSA is great because it accrues interest and there's no tax penalty for withdrawing it. You can put $5,000 into a TFSA annually.
Or, consider an RRSP -- a vehicle that is meant to be contributed to and grow over time. Also, if you put the money into an RRSP you'll get tax benefits but the money won't be as easily accessible as a TFSA.

3. Start an RESP for your kids
If you have children and expect that someday they'll go to college or university, an RESP is a wise investment. The federal government will add up to $500 a year until your child is 17 and if you contribute monthly or annually the compound interest will grow over time and you'll end up with a sizable amount. There are also significant tax benefits to the investment.

4. Invest in your home
If you get a bonus you can increase the value of your house and the rewards can be great when you sell. If your home improvements are done wisely -- kitchens and bathrooms are good places to start -- you'll easily make your money back and more.
Home improvements generally improve your quality of life too so you can enjoy the spa-like bathroom or open-concept kitchen until you decide to move.

5. Book a vacation
Sometimes you have to pay yourself too. If you're not too swamped with debt, you can find good deals online this time of year, even if you only get away for a long weekend.
Often I find some time away has mental health benefits -- it can give you perspective on your everyday existence and help you become more productive in the long term.