I know back in my day when I was working for "the man", I too got a yearly bonus; usually in December every year. The amount would vary each year.
For starters, my overall budget did not include the bonus, since there was no guarantee I'd get one at all really. But I did set up a plan "in case" I got it.
1) Top off the emergency fund (if needed) to what I needed for 6 months.
2) If anything left, top off all retirement contributions for IRA and ROTH.
3) If anything is left, use it to pay down my debt starting with the smallest debt first and work my way up to the largest debt.
Being that I stopped using credit cards around 2005 (give or take) my car payment was my smallest debt, and the next one up was the mortgage. Paid off the car and used the rest to lower my mortgage balance. This had absolutely no impact on my yearly/monthly budget.
Doing this, I actually managed to pay off a 30 year mortgage on one of my three rentals, about 18 years early. So I have a rental property that I own free and clear. The great part about that, is that with the rental income that I now get to keep, I'm using it to pay down another mortgage on another rental and hopefully get it paid off early too.
- I have no issues maintaining an emergency fund for 6 months of expenses.
- My retirement contributions get maxed out every year
- Since my daughter got divorced back in 2016, I've been able to give her a place to live rent free while she attends college and is working to getting on her own two feet. (She lives in the paid off rental for now)
