The end of year bonuses are back! Here’s what to do with yours
Employers are feeling particularly generous this season.
After a year of unprecedented workloads in an increasingly competitive job market in almost every industry, twice as many employers are offering their employees year-end bonuses compared to last year.
Google said it would give all employees, even interns, a one-time cash bonus of $ 1,600, while Tyson Foods said it pays hourly workers at its meat packing plants between $ 300 and $ 700 each this holiday, in addition to offering raises and more flexible work. schedules.
According to Challenger, Gray and Christmas, nearly a quarter of all companies, or 23%, said they offer a bonus based on company performance, up from 12% last year, marking the highest percentage since as the placement company started tracking performance bonuses. in 2015.
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Many companies have also said that they are increasing the amount of bonuses. Around 17% said the bonuses will be bigger than they were last year, hitting a new recent high.
“We generally tend to see premiums go up at times when the job market is really tight and that’s clearly what we’re seeing right now,” said Andy Challenger, senior vice president at Challenger, Gray and Christmas . “The employees are in the driver’s seat.”
For workers facing higher prices as the holidays approach, those bonuses come at a particularly opportune time, Challenger added. “Having extra money in the bank account is so precious.”
How to get the most out of your bonus
In tough times, a one-time cash injection can have a big impact on your financial situation, depending on how it’s used.
Regardless of the amount, Shelly-Ann Eweka, senior director of financial planning at TIAA, recommends dividing the payment into three categories to focus on paying down debt, saving and, yes, even some discretionary spending.
1. Pay off the debt. Start by tackling your financial “red flags”, including high interest credit card debt and payments that stress you out.
Under ordinary circumstances, credit card debt is particularly difficult to repay, especially with an average annual rate of over 16%.
And card balances slowly rose after Americans paid off a record $ 83 billion in credit card debt in 2020, helped by government stimulus checks and fewer discretionary shopping opportunities.
So now is a good time to reduce these balances again, which now average around $ 5,525.
2. Savings. Some of the money should also be placed in an emergency fund or longer-term savings account, Eweka advised.
For an added impact, workers with a 401 (k) plan could increase their savings rate to at least enough to get the full employer match.
“If you don’t get the game, that’s the No.1 priority,” Eweka said.
Otherwise, if you’re on track to meeting your retirement goals and your consumer debt is under control, parents may want to consider contributing to a 529 Education Savings Plan because of the many tax benefits. , Eweka added.
3. Expenses. Understandably, most people may want to splurge at least a little bit, and that’s understandable. But rather than blowing him up on an impulse buy, “be strategic,” Eweka said.
Whether it’s taking a class, investing in a personal trainer or exercise equipment, buying a few key pieces for a new work wardrobe, or supporting a charity that has makes sense to you, “it should be used to get you going,” she said.
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