There’s a Case for Blowing Your Bonus This Year

It sounds reckless.

Companies are slashing jobs. Pay is starting to flatline. Analysts are bracing for a volatile year. And yet, some workers are planning to blow their corporate bonuses, caring less what others may think.

Take Dana Hixson. The 28 year old in Akron, Ohio, plans to spend her bonus on a pair of shoes. Working in sports-analytics, she expects her bonus to be about 8% of her income. The firm said profits have been solid, so Hixson is hoping she’ll earn enough to fly to Las Vegas, stay at a top tier hotel and pick up a pair of Dior J’Adior slingbacks, retailing for as much as $1,550.

She hasn’t forgotten the roughly $30,000 in student loans she has. Hixson said she’ll try to contribute some of her bonus to either that or a similar necessity. But— like many other bonus spenders — she said she doesn’t think people should feel guilty about treating themselves.

“That’s the point of working all year,” she said.

This year’s bonus season comes at a time when it’s hard to predict where the economy is headed. Consumer prices rose more than expected in the latest reading. Cuts to interest rates could still be a way off. And companies, on a belt-tightening binge, have indicated bonuses will be lower, suggesting they aren’t as concerned about losing talent as in years past. Nevertheless, bonus spenders’ expectations continue to be high.

Tay Ladd, for instance, was so confident she’d meet her billable hours target for a bonus as a corporate lawyer in New York that she spent some of it on several Apple products last year. But she said doing so — and posting a video about it on TikTok — helped her work the hours she needed.

“Rewarding myself preemptively actually motivated me,” she said.

Spending extra income isn’t something financial advisers tend to recommend unless consumers have all their bases covered. That would include emergency funds between three and six months of salary, maxed out 401(k) contributions and debt payments on track. However, some money managers have long advocated for consumers to set aside a little “fun money” — be that from a regular paycheck or a bonus — to reward otherwise responsible spending and saving behavior.

In some ways, being “bad” by spending extra income can make being “good” more manageable. Career coaches, too, say spending through bonuses can help workers keep one of their most important investments: their jobs.

Sustaining a career can feel like a slog, but spending a bonus creates something of an “upward spiral,” according to Maggie Mistal, a career consultant and executive coach based in New York and Florida.

“You’ll be more excited and motivated in your job and will go down that path again,” she said.

While some workers have always blown their bonuses, experts see one particular factor in today’s economy that may be encouraging people to spend rather than save: real estate prices.

Julia Pollak, chief economist at the job-recruiting site ZipRecruiter, notes that in big cities, prices for even modest homes can easily hit $1 million. Such a property could require a down payment of roughly $200,000, which may prompt workers to wonder about the point of conventional “responsible” behavior if a home is out of reach.

“If you get to the end of the year and your bonus is $14,000, forget it,” she said of how some workers must feel faced with a hypothetical $200,000 down payment. “Just look at the math. If that person saved a bonus every year for 10 years, they still wouldn't be there.”

Treat Yourself

Julie Kemp, a 28 year old working in digital strategy, said she has no intention of buying property where she lives in Los Angeles. She’s structured her budget so her bonus doesn’t factor into her living expenses too. So when she earns enough to clock a bonus, she views it as a treat.

With a recent bonus, she bought a pair of AirPods Max headphones, Lululemon clothes, gold jewelry from a store in Beverly Hills and a handbag. The rest she invested in slightly riskier assets in her portfolio, including cryptocurrency. She takes her bonus haul as a sign of success.

“I’ve been in my career for seven years and there have been many, many years full of bonuses paying off debt, just having to take care of necessities,” she said. “Nowadays I’m in a good position. These things can be actual bonuses.”