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Bonus - Save or Spend
Old 01-24-2016, 04:04 PM   #1
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Bonus - Save or Spend

For those who receive bonuses at work, do you:

Save the bonus?
Spend the bonus?
Some combination of Save/Spend?

I have always saved 100% of any bonuses. It's easy, painless saving. Plus, my company, like most, goes on periodic downsizing binges. I never knew if/when the downsizing grim reaper was going to appear at my cubicle. If downsized and unable to find another job, I might have needed that bonus to buy food in some future year. If I managed to avoid the reaper, then saved bonuses just get me to FI faster.

For the first 15 or so years of my career, us little people did not get bonuses. They were only for the Execs. Then Execs decided we would all get bonuses, but raises would be lower. That way, the money they gave us would not get built into our wage base and compound. Thus, there would be more money for Exec bonuses in the future!!! Well, that's not what they told us, but we figured it out pretty quick.

Our first bonuses were around $200. Our reaction was "Geesh, don't bother wasting paper/ink to print the checks, just keep it". Bonuses went up rapidly in subsequent years. Considering the disparity between our $200 bonuses and the Execs multi-million dollar bonuses, I think the Execs were afraid we little people would hang them upside down in the corporate plaza and beat them like pinatas to see if we could get any coins to fall out.

When our bonuses became large enough to really notice, my boss (one of those "this dollar's burning a hole in my pocket" types) asked me what I was going to buy with my bonus. This was one of those "think on your feet moments", something I'm not good at. I told him I was going to save it. He seemed disappointed. To him, bonuses were meant to be spent.

I got to thinking that I should not use the "save it" answer again. When boss was dividing up the bonus money, he might say "well, if I give to Mr. Saver, it's just going to get saved. If I give it to Mr. Big Spender, it will go to a 100 inch TV or something similar".

The next year, when boss asked me the big question, I said it would go in the general fund, and get spent on some kid stuff. He was somewhat happier with this answer, since he also had kids and understood the "whooshing" sound as dollars fly out of your wallet for kid things. But, what I didn't tell him was that the general fund was also a holding area for money destined for savings, so, in the end, the bonus was saved.

In years after that, DS was getting older and college was looming. So I started saying, "Oh, huge college bills coming up, that bonus is destined for tuition payments". Boss was happy with this, as he was also battling college bills. But, what I didn't tell him was that I already had college all planned out and taken care of, so, in the end, the bonus was saved.

Nowadays, many of my same age peers have woken up and realized they need more than $10,000 in their saving account to fund retirement. They are discovering the joys of 401k catch up contributions, maxing out 401k's and IRA's, etc. So now, I can be myself and not hide my horrible character flaw. I can just say, "Oh, that bonus is going into retirement savings".
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Old 01-24-2016, 04:37 PM   #2
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My bonuses were typically $10-$20k. Some would go to home improvement, a little would go for fun, a little to charity, the rest saved. This allowed us to replace windows, put in granite countertops and bamboo floors, etc. as the money came in. I'm not sure we got much of that back when we sold, but we enjoyed the house for 12 years.
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Old 01-24-2016, 04:52 PM   #3
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My bonuses are generally 10-13K. 75% of my salary goes into my 401K, so I front load my 401K and max out by the end of March. I have done it as early as 2/28, the full 24K.

Increase your 401K contribution and have a larger paycheck at Christmas time, when you no longer need to contribute.
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Old 01-24-2016, 05:00 PM   #4
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Except for 2 years I always saved 100% of my bonus. The first time I spent it was to buy a small parrot. It was my first ever bonus. The second time was 25 years later when I used it to partially buy a boat - a decision I STILL regret even though the boat has been long sold.

By saving my bonuses and saving 1/2 of any raises I received I was able to retire at 52 years old.
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Old 01-24-2016, 05:05 PM   #5
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Money is fungible. For me, a bonus just increases annual income. It happens that the most recent one in December went straight into my checking account and enabled me to pay the last college tuition bill for our daughter without tapping the after-tax investment account. Alternatively, I could have paid the tuition out of the cash balance in the investment account and then saved the bonus. The result is exactly the same though.
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Old 01-24-2016, 05:09 PM   #6
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Quote:
Originally Posted by Scarecrow View Post
For those who receive bonuses at work, do you:

Save the bonus?
Spend the bonus?
Some combination of Save/Spend?
I'm retired now, but when I was working I never spent my bonuses. I saved them instead.

Edited to add: Now that I think about it, I also used some of them as additional payments to pay off my mortgage faster (payments to the principal).
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Old 01-24-2016, 05:29 PM   #7
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Saved. Loved the instant boost to my early retirement account, plus it kept me out of bad habits of getting expensive toys I didn't need.
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Old 01-24-2016, 05:55 PM   #8
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Not quite bonuses but additional income (e.g. overtime, retroactive pay). Some years, it's saved, some years it's spent (typically for travel).
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Old 01-24-2016, 06:05 PM   #9
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I had a general approach of roughly 1/3 to saving, 1/3 to necessities (e.g., home repair), and 1/3 for fun. Fun might be nothing more than an extra pair of Broadway tickets. But I always felt that some portion should be spent on a "selfish" whimsical activity to just enjoy life.
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Old 01-24-2016, 06:48 PM   #10
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My bonus is usually about $500 after taxes. I don't track as it just goes into my checking account but it probably goes to pay for Christmas.
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Old 01-24-2016, 06:56 PM   #11
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I rarely received a bonus but for many years earned salary and commission based of if meeting sales quotas. Invested in 401k from salary and typically saved majority of comp. checks. DH always encouraged me to just enjoy spending a comp check or two, but I could never quite do it. In the long run these checks paid for waterfront property and eventually our retirement home without a mortgage. Also, allowed me to RE.


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Old 01-24-2016, 08:52 PM   #12
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My "bonus" is usually 20K to 40k a year. But it was really just money skimmed off of my salary and withheld until the end of the year after expenses were subtracted. Since it is really earned income that was simply being withheld, I treated it like all my paychecks--spend some, save some, and give some away.
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Old 01-24-2016, 09:18 PM   #13
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Always saved any "bonus", my wife as well.
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Old 01-24-2016, 09:25 PM   #14
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The one memorable bonus I got, I could have done something reasonable, like put it in the bank. However, I got a postcard that said, "Fly a jet". The rest is "Priceless". I do not remember the money, but I remember the experience. That's living!
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Old 01-24-2016, 09:57 PM   #15
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I always had a surplus of income over expenses which was therefore saved, so any bonus I received simply increased that surplus.


One bonus, however, happened to coincide with a new car I had planned to buy back in early 2007. The bonus, which ended up being about 25% of the car's price, resulted in my not having to pull as much from savings as I originally thought.
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Old 01-24-2016, 10:05 PM   #16
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Quote:
Originally Posted by RunningBum View Post
Saved. ...... kept me out of bad habits of getting expensive toys I didn't need.
Exactly!
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Old 01-24-2016, 10:06 PM   #17
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When I got my first (very modest) bonuses, I gave 10% of it to my church (tithe), bought something I had been wanting that was less than 50% of the balance, and invested the rest. Over time as they grew, I continued the tithe but most of the rest was invested or put towards college for the kiddos.
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Old 01-24-2016, 10:15 PM   #18
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Bonuses coincided with when car insurance/home owners insurance was due. I'd also fund the kids 529's with it. All things that needed to happen, but the timing of it was that I didn't need to set aside $ for those things knowing that bonuses were coming. On years they actually honored the formula for bonuses (it was part of our 'total compensation package' and if metrics were met was supposed to meet certain minimums... but somehow they always had reasons to not pay out the published amounts.) Anyway - on years we got the full bonus, the balance went to savings.
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Old 01-25-2016, 02:38 AM   #19
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Performance bonuses were pretty new when I retired. After taxes, mine typically amounted to $1200-$1500. Better than a sharp stick in the eye. Enough to replace one appliance, or the co-pay on one dental crown.
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Old 01-25-2016, 02:53 AM   #20
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Bonuses were usually in the range of 2-8 weeks pay before I made partner. Once I made partner, there was an extra payment after year end numbers were known.

My usual practice was to save most of it and if I had met my savings goal for the year I would spend some of it on something. It helped to keep my savings goal low.
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