How do you treat bonus money?

[kozachka]

I work for a company whose financial year end on July 31st, which means I just found out how much money I am getting in terms of bonus. We knew what the company average multiplier would be for a while now, and obviously I knew my target since accepting the job offer last year. I am excited since I am getting more than I expected, and have also got a one-off bonus for a project earlier in the year. So I am now wondering if I should treat myself to something special and to what extend.

It's my first sizeable bonus in 3 years because of the move and being out of a job for 9 months, and I did not get anything special in the previous 2 years, just put money towards the bills and savings. We have no debt besides mortgages on rental properties and have substantial savings (enough to last us 12 months in case of an emergency plus some retirement funds). DH is encouraging me to buy a fun (probably still used) car since both of our vehicles are old ('95 and '99) and sensible. I am not convinced and would rather save the bulk of the money, and only spend the extra that I did not expect and that was given to me for my better than average performance. It would still be a good chunk of cash, even after tax, and I could get a few very nice things. What gives me a pause about spending it is that we don't know how long DH's business will last and if we'd be buying another property in a year or not. It would not make enough of a difference but still I feel guilty.

Would be curious to hear how your family treats bonus money, and what you would do in my situation.

[niccig]

Well, our days of bonuses are over. In fact it was never a bonus, but deferred salary to keep DH's overtime rate low. One of his pay cuts was to eliminate the deferred salary and they called it a bonus, which it never was - I could write a BP on that.

When DH did get it, we either spent it on something we needed, or put it towards the emergency fund until that was fully funded.

In your case, I wouldn't spend it all. I've become more fiscally conservative and I think if DH gets a bonus again, we will use that to either bump up savings, or investments, pay off some of the mortgage or use it to do work on the house. I plan to do the same with any unexpected money that comes our way. I would want it to go to something lasting.

It sounds like you will need a newer car at some point. If you don't want to get it now, maybe sock some of this away for when you do decide to make that purchase. My reasoning is that a) you don't know if you'll get a bonus every year or if it will be this much b) if your DH's income fluctuates, you should save to get through lean times.

My DH is all for spending, but that is changing. We were talking about some plans for work on the house and he did say "if we hadn't bought x we could have done y by now." Even then, I do think we would use some bonus money for fun things, just not as much as before.

[cvanbrunt]

We use bonuses to pay cash for major purchases and projects. Our retirement and savings are fully funded so in the past we have bought a car, landscaped the yard, and renovated/finished the attic. We are moving to an area with really high COL so we are now thinking of it in terms of income (at least the set bonus, the multiplier/company performance stuff we never count on).

[KrisM]

We treat it as income - 20% goes to retirement, 25% goes to paying off the mortgage, and the rest to savings.

[BayGirl2]

We use bonuses to pay cash for major purchases and projects. Our retirement and savings are fully funded so in the past we have bought a car, landscaped the yard, and renovated/finished the attic. We are moving to an area with really high COL so we are now thinking of it in terms of income (at least the set bonus, the multiplier/company performance stuff we never count on).

:yeahthat: we use it for major purchases like that, or to pay off low interest school loans, or it's saved for a major purchase like a car. I believe in taking a small % out (<10%) for fun spending. I think it's important to save but also important to enjoy your reward a bit. I would take the "extra" portion and reward yousel with something youve wanted, no guilt. If you don't need a new car at this point, save the rest.

[egoldber]

We have typically used part of a bonus as "fun money" and the rest as regular income.

As a federal employee, I am able to take part of my "bonus" as additional paid time off, which is what I do because time off, for me, is more important.

[TwinFoxes]

I voted "other" because we would typically use it for something like a minor home improvement, with a little fun. Or bills, home improvement, fun. Recently, it would was 529s, plus a little fun. Never all fun. Not since we aren't DINKS any more.

[SASM]

I think that I voted for "It's fun money" but Meant to vote "other" as in "Bonus? What's a bonus??" Sadly, no bonuses here...neat concept. Depending on the amount, we would probably pay bills but use a small amount for something fun.

[JBaxter]

College funds or the majority of it any.

[wellyes]

A bonus that's a surprise is fun money. A couple hundred bucks here and there, that kind of thing.

But a bonus that is calculated as part of annual salary -- such as in finance -- is income. In my company you typically make an annual wage plus 15%-25% in "bonus". To me that's just part of salary package, broken out as a % to give the company flexibility. I would treat that much cash as fun money.

Incidentally, when people get outraged over "Wall Street bonuses", I don't think that's fair. We're talking about five figures of income, at least, which people use when calculating how much mortgage they can afford or if they can afford private school. I know that sounds privileged. But in terms of real day-to-day, giving employees a massive pay cut when its the corporation and board who misbehaved is not good business nor fair.

[SnuggleBuggles]

Tiny bit for fun, the rest into savings.

Beth

[Trigglet]

Never had one, don't expect to (all teachers in this family!) - but if we did, I think I would do the same as PPs - a smallish % for fun and the rest to savings/mortgage/debt.

We can dream...

[brittone2]

We take a little bit for fun money and treat the rest as we do the rest of our income. DH's company has paid a bonus for 9 of the last 10 years or so, but he's only been there for a little over a year. We just count it as part of his salary, but use maybe a few hundred for something fun. (eta: we don't want to count/rely on it, but we use it to make life/bills/saving easier)

[Momit]

We have usually taken a small portion of the bonus to use for something fun then put the rest into savings.

[Carrots]

DH's bonus $ goes directly into our investments/savings. We can pull $ out if we really need it for fun stuff or bills, but we try not to.

[secchick]

I elect to put a substantial portion into my 401k to max it out early. Then we fund 529s for the kids. Then I put some extra toward the mortgage. Then, we look at what is left. This year, I bought my Odyssey 2 months before bonuses, so we paid it off. We may do something with the rest like buy an iPad and put the rest in savings.

[crl]

We have done different things. My bonuses were tiny (federal government) and I usually bought a fun piece of clothing and put the rest towards student loans. DH's are much more substantial (big law) and he has sometimes used half for fun and half in savings. More recently it has been all in savings.

Catherine

[lizzywednesday]

The last time I got a cash-bonus, I was still single!

I think I saved most of it and spent some on something totally frivolous, like a DVD player.

My company has done away with cash spot-bonuses in favor of a "points" reward system for things they find useful and/or outstanding. I think the way they do it now has fewer tax repercussions for them.

So ... the last time I got a points-bonus, I "spent" the points on a Visa gift card & used it to buy DD a new dress & a cute coat.

[sweetsue98]

My DH and I both treat the money as regular income. We do take a little money out for fun. My DH and I were both laid off in the past 3 years so we are paranoid...

[vonfirmath]

Bonuses go to savings. They were not expected income.

[happymomma]

My DH just got his bonus for the year. Wasn't much and we weren't counting on it. So we just went out to eat dinner and put the rest in our savings.

[jren]

It's regular income for us - as in there's always a bonus, it's part of the salary package, but the amount varies from year to year based on company and employee performance.

We don't use it to pay bills (mortgage and regular monthly bills), but have used it for special projects (fence, landscaping), adoption costs, or to pay off cars.

I voted "other".

[Tracey]

Bonuses go directly to savings/investment.

[ellies mom]

For us it just really depends on what is going on. Sometimes we use it for bills, sometimes we use it for the stuff around the house that we've been wanting to buy but have been putting off (new dishwasher for example) and sometimes we use it to buy something fun that we have been wanting(new TV for example).

We bought a new TV and cabinet with my husband's most recent bonus. He has been wanting a new TV and I have been wanting a smaller "TV and related crap" footprint in the living room. So even though technically it was a fun purchase, my living room looks much better than it did before. We probably should have replaced the dishwasher but I'm happy with the decision we made.

[elektra]

We now do about half to savings, and the other half gets split up according to what DH and I discuss is the best way to use it.
For DH's last bonus, He got about 1/4 towards a BBQ island project he wanted to do. So it was definitely"fun" money, but it was also a home improvement thing.

As much as I am on top of DH for over spending, I think it is important to reward yourself every now and again. And if you earn a true "above and beyond" bonus, I think it is not truly living life to the fullest if you sock 100% away to savings and don't enjoy/spend a few hundred dollars of it at the very least. And that could be buying yourself some new clothes, giving it to someone who needs it, buying a new car if you have beaters, redoing a bathroom- whatever.
My bonuses are a little different than DH's because they are really more like income. My company just sort of holds some of it back basically unless certain goals are met, and then once they are paid out after taxes, the bonuses are not huge. I still do the same kind of breakout though- the percentages are just shifted a bit. I put more like 80% towards bills/savings, and do 20% for something fun.

[BabyBearsMom]

In my old job we used to get large bonuses and I usually put it towards whatever big thing I was saving for at the time. I have a fund where I save money for big house projects I want to do, family vacations etc. So I use it for something I want but can't get based on my regular salary.

[kozachka]

A bonus that's a surprise is fun money. A couple hundred bucks here and there, that kind of thing.

But a bonus that is calculated as part of annual salary -- such as in finance -- is income. In my company you typically make an annual wage plus 15%-25% in "bonus". To me that's just part of salary package, broken out as a % to give the company flexibility. I would treat that much cash as fun money.

Good point re: bonus being broken out of your regular payroll to give employer the additional flexibility on the payroll. Majority of my bonus this year is of the 'calculated as part of my annual salary' variety, which is precisely why I am more inclined to treat it as a regular rather than fun income. The amount that I got completely unexpectedly for a one off project went into my fun savings account and will be spent on something that I want but don't need (e.g. a pair of earrings or something similarly frivolous) once I accumulate enough dough (I've started asking close family members for cash instead of gifts).

The part that I am still struggling with is the amount that I am getting as part of the annual bonus that's in excess on the average company multiplier. This surprise bonus is more than a few hundred bucks, which I would have had no hesitation blowing on clothes/shoes/bag. I am a saver, and my natural instinct is to save most, if not all, of it, or spend it on something beneficial if not immediately necessary (e.g. dental implants), but DH is encouraging me to live a little and do/buy something fun. I've been working a lot, taking care of DS with DH is out of the country 60%-50% of the time, and not travelling.

[edurnemk]

In our house, bonus = extra savings. It goes straight into our savings account / retirement fund / college fund / down payment for a house, etc.

Sometimes we'll use part of it for a big one-time purchase, i.e. purchasing a new car, paying part of a special trip, etc. But we try to pay for our fun things out of our regular monthly savings.

[ett]

It's regular income for us - as in there's always a bonus, it's part of the salary package, but the amount varies from year to year based on company and employee performance.


:yeahthat: DH's bonus is like this so we treat it as we do our income.

[blisstwins]

Not regular income, but we use it to pay of student loans, etc. That feels as good as a new handbag! When we get total windfall money we put it into our kids college funds.

[jgenie]

We save the majority of it but we each take a bit to splurge on something.

[squimp]

Fun! I work hard and we max out all our savings and deductibles, so I usually go for something fun. Like a nice piece of furniture that I need anyway but have been keeping myself from getting. I'm looking at a sofabed this fall.