There’s a Case for Blowing Your Bonus This Year
Rewarding yourself for your hard work and achievement is important. Too often we are taught to emphasize our “needs” (ie. basic expenses and savings regimens) and ignore our “wants” (ie. entertainment, convenience purchases and lifestyle enhancements). I would assert that self-congratulation is an important way to sustain your motivation at work, protect your self-esteem and can actually be a critical part of maintaining your savings discipline. After all, “All work and no play makes Monique a dull gal!”. But, like anything, this can get out of hand quickly. How do you know how much you can afford to enjoy? If you establish your annual budget based on your predictable income streams (salary – even for the self-employed! – pension income or whatever income stream is typical for you), then you can build a sustainable budget and savings discipline. Then, when work is rewarded or a career achievement is attained, your bonus can be used to enhance your lifestyle (think vacation, a status item etc.) but in the event that your bonus is disappointing or economic conditions are trying for your industry, these purchases do not make an impact on your day-to-day lifestyle and long-term savings goals.
Spending extra income like annual bonuses isn’t something financial advisers tend to recommend — unless you have all your bases covered. That would include emergency funds between three and six months of salary, maxed out retirement contributions and debt payments on track. However, it’s perfectly OK to set aside a little “fun money” — be that from a regular paycheck or a bonus — to reward otherwise responsible spending and saving behavior.
