What should I do with a bonus?
Cash flow
Pre-allocate it before it lands. A common framework: model after-tax amount, split between financial goals and intentional lifestyle, and avoid letting it sit undecided.
Model the after-tax number
Bonuses are often supplementally withheld at 22% federally. For high earners, the actual marginal rate may be 32-37%. Plan against the realistic net, not the gross.
A simple split
A practical default: 60% to financial goals, 30% to taxes if needed, 10% to intentional lifestyle. Adjust to your own situation.
Avoid the 'undecided' state
Money that lands without a plan tends to drift. The decision is usually easier before the deposit than after.
What people often get wrong
- Spending the gross instead of the net
- Letting the bonus 'settle' for months
- Treating every bonus as a windfall instead of expected income
What to think about next
- Estimate after-tax amount.
- Pre-allocate before deposit date.
- Adjust withholding if the bonus pushed you into a new bracket.
When to consider working with a CFP®
Working with a CFP® can help when these decisions feel intertwined, taxes, investments, cash flow, and life goals tend to move together, and a planning relationship can offer structure, prioritization, and accountability over time.
Frequently Asked Questions
What if the bonus is in stock?
Treat it as RSU income, tax at vest plus a strategy for what to do with the shares.
Talk to a CFP® who works with high earners.
Connect with a CFP® to help you navigate this decision and build a comprehensive financial strategy.
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