MANAGING BONUSES PRUDENTLY

The word bonus evokes happy thoughts and feelings among workers whenever it is to be paid. This is because it is extra income. Bonuses are additional entitlements employees earn aside from their normal salary and allowances. In other words bonuses equate to more money coming in.

Now there are different types of bonuses, the commonest of which are Performance bonuses, paid out after performance appraisals at the end of the Company’s financial year; and Thirteenth month Year-end bonuses, usually an additional month’s salary paid in December. Bonuses vary from organization to organization, and depend on what is stated in your employment contract.

Most employees tend to see these bonus payments as additional spending money, meant to be ploughed into meeting your living expenses. Nothing can be further from the truth. Bonuses rather, are meant to be invested into profitable ventures that can generate wealth.

Your bonus is a lump sum of money, paid in addition to your monthly entitlement. Don’t mix your bonus with salary and proceed to spend all on your living. This strategy will not lead to wealth. Bonuses should be added to what you have saved for investment and correspondingly deployed.

You might believe that you lack capital to pursue your dreams, but that is what your bonus is for. It is a source of some capital meant to be invested for the future. This sum may not be substantial, but investing it is a step in the right direction. You need to see your bonuses not as more money, but as more capital.

I know that with the rising cost of living one needs every penny you can make to fund your lifestyle. However putting all you have into funding your lifestyle is foolish. Any money spent today on your lifestyle is gone forever, never to be utilized again, while monies invested remain at your service, working to produce more for you again and again.

Murphy’s Law states that, “Expenses will always rise to meet income.” This is true but you must fight to keep your expenses below income. When expenses meet and exceed income poverty and bankruptcy is the end result. You will begin to seek for extra ways to fund your lifestyle which could lead to unethical acts to acquire the required resources.

Paying bonuses during the Christmas season typically causes people to go overboard on their expenses. They want to have fun and enjoy life, forgetting there is a brand new year to start after the holidays. This is the reason why many call January the hardest month, they have spent all the money meant to use throughout January during the holidays, thus causing them untold hardship. This is most unwise.

The following steps should be taken to ensure that you manage your bonuses prudently henceforth: research and plan what opportunities you will invest in long before the bonus comes, ensure the bonus gets transferred into your savings account by your company if possible, have a budget, track your expenses and spend more on your needs, not your wants. Take time to think through major purchase decisions and look for areas you can make savings.

You must be disciplined in your spending, and get lots of advice on money and investing so as to understand what it entails. Focus your mind on a future where you may have whatever you desire, which will come after the pains of today.

This also applies to your other incomes as well – dividends, commissions, profit sharing, interest and royalties. I believe in having multiple streams of income, which must be used to create more wealth. Ploughing back your inflows will lead to more and more wealth being created for you. It pays to be wise with your money at all times, especially bonuses and other additional sources of income.