7 Best Ways for Attorneys to Use Their Year End Bonus

For many lawyers, the year-end bonus is a welcome reward for a year of hard work. Whether it’s a modest boost or a significant windfall, this bonus offers an opportunity to make meaningful progress toward your financial goals. Instead of letting it get lost in the shuffle of holiday spending or an impulse purchase, take a moment to strategize. Thoughtful planning can turn your bonus into a tool for building wealth, reducing stress, and setting yourself up for success in the year ahead.

If you’ve recently received your year-end bonus, here are the seven best ways to make it count.

1. Pay Down High-Interest Debt

Debt can be a heavy burden, especially if it’s racking up high interest rates. If you’re carrying credit card debt, personal loans, or other high-interest liabilities, using your bonus to pay down or eliminate these balances can be a game-changer. High-interest debt erodes your wealth over time, and paying it off is essentially a risk-free return on your money.

For example, if your credit card carries a 20% annual interest rate, paying it off is like earning a guaranteed 20% return—something no stock market investment can reliably offer. Once you’ve tackled high-interest debt, you’ll have more cash flow available each month to allocate toward savings, investments, or other financial goals.

2. Pay Down Student Loans

For many lawyers, student loans are a significant financial burden. Using your year-end bonus to pay down your student loans can help you make meaningful progress toward becoming debt-free. If you have private loans or federal loans that don’t qualify for forgiveness programs, putting extra money toward your balance can save you thousands in interest over the life of the loan.

To maximize your efforts, check whether your loan servicer allows you to specify that your extra payment should go toward the principal. This approach reduces your outstanding balance faster, lowering the total amount of interest you’ll pay. For federal loans, also consider whether you’re enrolled in an income-driven repayment plan, as making extra payments could impact your eligibility for forgiveness programs.

3. Max Out Retirement Contributions

A year-end bonus is the perfect opportunity to boost your retirement savings. Contributing to a 401(k), IRA, or other retirement plan offers multiple benefits, including tax advantages and compound growth over time. If you haven’t yet hit the annual contribution limit for your retirement account, consider using your bonus to close the gap.

For 2024, the contribution limit for 401(k)s is $23,000 if you’re under 50 and $30,500 if you’re 50 or older, thanks to catch-up contributions. If you’re already maxed out on your workplace plan, consider contributing to a Roth IRA or a backdoor Roth IRA if your income allows. The earlier you contribute, the longer your money has to grow, and the closer you’ll be to financial independence.

4. Build or Strengthen Your Emergency Fund

Life is unpredictable, and having a robust emergency fund can provide peace of mind and financial stability. Ideally, your emergency fund should cover three to six months’ worth of essential expenses, though some lawyers—especially those in solo practice or with irregular income—may prefer a larger cushion.

If your emergency fund is underfunded or nonexistent, using your year-end bonus to bolster it is a smart move. Parking this money in a high-yield savings account ensures it’s accessible when you need it while earning interest in the meantime. This financial safety net can help you avoid dipping into investments or taking on debt when unexpected expenses arise.

5. Contribute to a Taxable Investment Account

If you’ve maxed out your retirement accounts and still have bonus money to allocate, consider contributing to a taxable investment account. Unlike retirement accounts, these accounts don’t have contribution limits, and they allow you to invest in a wide range of assets, including stocks, bonds, mutual funds, and ETFs.

While taxable accounts don’t offer immediate tax benefits, they provide flexibility that retirement accounts don’t. You can access the funds at any time without penalties, making them an excellent option for medium- and long-term goals, such as buying a home, starting a business, or saving for a major life event. Working with a financial advisor can help you build a diversified portfolio that aligns with your goals and risk tolerance.

6. Invest in Yourself

Your year-end bonus can also be a springboard for personal and professional growth. Investing in yourself might mean taking a continuing legal education (CLE) course, pursuing a certification, or attending a conference that can help you build your skills and grow your network. These investments often pay dividends in the form of higher earning potential and career advancement.

On the personal side, investing in your well-being is equally important. Consider using a portion of your bonus for experiences or tools that enhance your quality of life, such as a gym membership, a wellness retreat, or even financial planning services to help you chart a path toward your goals.

7. Contribute to Long-Term Goals

A year-end bonus is also an excellent opportunity to make progress on long-term goals, whether that’s buying a home, funding your child’s education, or building generational wealth. For lawyers with children, contributing to a 529 plan can provide tax-advantaged savings for college expenses. Utah’s My529 program, for example, offers state tax benefits and flexible investment options, making it a great choice for parents in the Beehive State.

If you’re saving for a down payment on a home, consider setting aside part of your bonus in a high-yield savings account or a certificate of deposit (CD) to grow your money while keeping it safe. For those already on solid financial footing, using your bonus to invest in a diversified portfolio of stocks, bonds, or real estate can help you build long-term wealth.

Bonus Tip: Don’t Forget to Enjoy It

While it’s important to use your bonus wisely, there’s nothing wrong with reserving a small portion for pure enjoyment. Treat yourself to a vacation, upgrade your wardrobe, or indulge in a hobby you’ve been neglecting. The key is balance—spend thoughtfully, but don’t forget to celebrate your hard work.

Final Thoughts

A year-end bonus is more than just a paycheck; it’s an opportunity to make strategic financial moves that can pay off for years to come. Whether you prioritize paying down debt, saving for retirement, or investing in your future, taking the time to plan can help you maximize the impact of this extra income. And if you’re unsure where to start, a financial planner who specializes in working with attorneys can help you create a strategy tailored to your unique needs and goals. By using your bonus thoughtfully, you’ll set yourself up for success in the coming year and beyond.