Maximize your bonus

(Money Magazine) -- Christmas may come in December, but for many employees the biggest gift arrives in January. That's when holiday bonuses tend to be collected.

If you didn't get one, you may be eligible for a performance-based bonus: A recent survey from Hewitt Associates shows that 80 percent of employers are offering these types of incentives, over just 51 percent in 1991.

All the more reason not to blow the cash. After taking a touch off the top for fun money, put the rest to work. Allocate your dough according to the list below.

You need at least three months of living expenses in a money-market fund or high-yield savings account; six if you have kids or are the sole breadwinner.

Use your bonus for this first, advises Eric Cramer, a financial consultant for Charles Schwab. Or you'll perpetually turn to credit for emergencies, "setting yourself up to be trapped."

With what's left over, wipe out credit-card balances and other debt with double-digit interest rates.

Next priority: Your future. Your company may deduct your normal 401(k) percentage automatically, but you can lower your tax bill and pad your balance by calling human resources and asking them to up your contribution just for this paycheck. Or max out an IRA. You have until tax day to make 2006 contributions.

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