Bonus - Save or Spend

Some years, I save all of it. Others, I save most of it and use some to pay for home improvements (replacing a furnace, installing A/C), though this year's will likely go toward a vehicle for my wife. This will probably be the first year I don't save more than we spend out of it.

Wait, that's not true. I paid for our honeymoon with bonus money (though my "bonus" is a known amount, paid on the same day every year... it's only "bonus" in that it's over my base salary and one lump sum!).

I agree that it's fungible. We don't view it as "extra" in any way. The fact that it is a significant lump sum is the only reason it gets treated or used any differently than regular paychecks.
 
We always save bonuses. They are treated as regular income; any money earned above expenses is saved.
 
For seven years, it went mostly for the kids college tuition expenses, last year some for a wedding and some for a new car for my wife, and this year it will again partially go for another wedding. Maybe next year I can save some and spend some on me for a change.:)
 
Do to the labor laws where I worked and the type of job I had, my bonus income was never less than 16% of the total yearly compensation, and some years was over 50%. From the first year employed we learned to make do with the monthly paychecks, so that bonus money was automatically put aside, for savings and investments.

Medical and other emergency expenses ate most of the savings over the first 10 years. After that, though, the discipline of not viewing that part of income as "spendable" paid off, which is how we were able to set aside enough to retire early. Spending, like saving, is habit forming, and also tends to be self-reinforcing. Once you start doing one or the other, it is easy to continue doing the same.

Spending bonuses is like eating potato chips. There is a moment of enjoyment, but it is short lived and then you want more.
 
Senator said:
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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I like your way of thinking. Frontload it...

Mine gets put towards debt (mortgage, car loan). meh, I am only 34, I have time. Cars are brand new, home is practically new, so its not terrible debt.
 
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My wife and I work for the same company and bonuses are all over the place year to year. For that reason, we never "count" on it for anything. Almost always we use a good chunk of it for travel, which we love to do and place a high value on. From a weekend getaway, to 1-2 weeks out of country. Never takes much to convince me to spend it that way. Otherwise, it is used to fund something that we need or were planning to do... but had no idea how we were going to pay for it. Might be a new car purchase or a major home renovation project.

While we are very committed savers, I can honestly say that I don't think we have ever put any bonus money away for retirement......
 
We do not have a budget, so we spend money as needed and save the rest. There is no concept of that a certain amount of money has to be spent. We just consider any bonus or additional income as the INCOME. In this sense, the bonus or additional part is actually saved since the spending part does not change where or not there is a bonus.
 
I've gotten very healthy six figure bonuses for the last ten years. We've either put them into mutual funds or used them to pay off the house/invest in real estate. The fastest way to FIRE is to keep your spending flat while amping up your investments.


Sent from my iPad using Early Retirement Forum
 
My wife and I both deferred every bonus we ever received over a period of 20+ years. This is one of the best retirement savings strategies: live within your salary and bank the bonus.
 
In the early days, the bonus would go to the friendly bank manager to pay off our demand loan which we used to live on. Once we were LBYM, it went into investments. We always used to include necessary purchases and travel in our regular budget, even before LBYM.
 
I always tried to take 25% (after taxes and 401k ..ie take home) and just spend it without guilt. I would try to spread it out over 12 months, things like maid service once a month or flowers or a few weekend getaways planned throughout the year.. something like that so I could enjoy it until the next one came.

The rest went to paying down debt (when I student loans), refilling emergency (when it was low) and then savings.
 
Souschef said:
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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As a Naval Aviator I already did the jet stuff, but one year my wife got a nice bonus and I was going to save it and she said "no way!" So we went to Napa Valley for 3 days and went on a balloon ride. And just like you, I don't remember the money but the balloon ride was awesome.
 
I got a "spot award" once. $50. Closest thing I ever got to a bonus. I worked a lot of overtime including an over-nighter one week to earn that $50. I took my bride out to dinner to make up for being missing in action on the home front for a week. :flowers:
 
Walt34 said:
I worked in government. What is this "bonus" thing?
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typically a target of your base pay, payable upon attaining certain goals throughout the year and....more importantly....the amount of the bonus pool at the end of the year

when I first started in this business 30 years ago, no non-officer employees got a bonus, you had to work 40, 50, 60 hours a week for base pay with zero overtime. When I switched companies at age 31, I started getting bonuses that were about 15-20% of base.
 
Our bonuses are pretty substantial. We spend maybe 1% on something fun, give some to charity and use the rest to fund IRAs for the year, max out our HSA and the rest goes into other after-tax saving.
 
Okay, thanks. I knew it was "extra" income, but didn't know if it was calculated or an arbitrary award based on planetary alignments.
 
My current has a target % based on level within the company with a portion based on company performance, a portion based division performance and a portion based on personal performance.
 
Paid down the mortgage a bit, wife would buy some nicer clothes for her and the girls (thank god she didn't pass before they grew up, I would have had them in Walmart finest.) and upgraded on vacations year the bonus was higher than expected.

Looking back I wish I spent more of it on better vacations than we did. It would have been worth OMY.
 
I once managed an engineering project for 8 months that ended up as one of the company's greatest successes. As a recall, the 5 main team members got $300 in bonuses. Out of that, they took taxes. I can't remember what I spent it on. But I do remember the experience.


At a different company, I got a sizeable bonus (to me anyway). I spent about 1/2 of it to speed up a hobby project I was working on, the rest went to IRA's (including catchup dollars) for me and my wife.


I believe on treating yourself when receiving unexpected monies. That is what it was intended for, right? Treat yourself in both the short term and the long term. Spend some on a memorable moment and save al least 1/2.
 
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