Bonus as Base Salary

No I never did because the company my husband used to work for was very stingy with them and would work the numbers so that it appeared not all of the performance factors were met which meant less of an incentive payout. Then by the time 401k was withheld it wasn't substantial enough for me to get excited about.

Personally I have never been a fan of "bonuses" for this reason. I only count on base salary.

Now when he switched jobs he did factor that "bonus" into his salary requirements so in a way it is now guaranteed ;-)

Hi J.,

I am a financial advisor. When you create your household budget, you only put the money that you can count on (although in this day and age even a salary can go away overnight!) into your income. So a bonus is just that - something extra that might or might not happen. Calculate your budget using your husband's salary, your salary if you have one and any other certain income (interest income, rental income, etc.) as your income and then your expenses on the opposite side. If a bonus comes, than you can use that for the items you mention (vacation, savings home improvement). If the bonus does not come than you will be okay on your budget and you simply do not have vacation, savings or home improvement.

Cheers,
C.

You factor your budget around your definite income.
Bonuses are not definite.
Why?
Because it's WAY TOO EASY to come up with a way to say performance did not merit the bonus/increase.
Heck, for the last 6 years a cost of living pay increase has not been definite.
Maybe your husband's company will not be like that, but the companies I've worked for have been EXACTLY like that.
Your household budget does not include the bonus amount.
AND you certainly do not make reservations / vacation plans until the money for it is sitting in your bank account waiting for you to spend it.

My husband's bonuses are unpredictable since they are not promised nor even tied to his personal performance. Therefore, things like that can't be factored in to our base household income.

When they do happen, they money is added in then and everything is given a purpose.

I don't treat it like 'extra fun cash', meaning that if I wasn't already planning and saving for a vacation, I wouldn't spontaneously take one just because of a bonus.

I'm the same way with other unexpected funds and things like tax refunds. I think that all dollars should be treated with equal amounts of respect and consideration.

So this isn't really a bonus it is more like an incentive/performance plan. No, we never count our bonuses or OT or raises for that matter. My husband did not get a raise for two years. Company was struggling. However, he did get his bonus because he is in sales and his bonus is based on products he sells. I have been very lucky in that I have received very generous raises and bonuses. That money goes into a separate account for college, retirement and paying down our debt. But I take nothing for granted that we will continue with bonuses or raises. This economy is very difficult.

We have NEVER depended on the bonus as a source of income for our monthly expenses.

We budget around our base salaries. Bonuses and raises are NEVER guaranteed.

If you can live and save on your base income, then the rest of it is as intended... a bonus.

Nope, we don't use bonsues in our budget--just in our planning for investments, home improvement, and saving for the down payment on our forever home.

I hate to say but this is the company's way of saying the bonuses are not going to be what they used to be.

Is he guaranteed anything? In writing? Then the salary and the guarantee is what you should be basing all your financials on. The rest is performance based (both by the company and your husband).

One year I got a great bonus, $6,000, for 4 months of work.. The next year, I expected a lot, but my office missed its $20 million dollar goal by 50k and my bonus for the YEAR was $1,500. We worked our butts off (the goal for the year before had been 2 million - the goal for all other offices but ours). And that's how they thanked us.

Gaurented OT and bonuss should never be factored when figuring bills. I had a freind that worked at a company for 7 years, always had x amount of OT.. then one day it went away.. because they were getting it for 7 years they did base thier bills around it and now they are struggling because it is gone.

I would not put it in the mix for the day to day bills.

I would NEVER plan on anything other than 80 hour pay checks,

I would go to his human resources department (I hope they have one) and sit down in person and ask to have this explained, as well as laid out in writing. I believe that if something's called a bonus, the employer can simply say, "We didn't hit targets this year so there are no bonuses at all." That would effectively harm, if not destroy, many a family budget if you are factoring that "bonus" in as a reliable part of your income. I would not do that and would budget based only the money you KNOW will come in. And the bonus amount can vary widely -- If next year the bonus is 5 percent and you get 97 percent of THAT, you have seen a big drop in your "income" from one year to the next.

Ask HR for a written explanation. And don't depend on one cent of that money.

Another person posted here recently about her husband's company denying all bonuses because the company wasn't doing as well financially as it had previously. It's a bonus; we're not doing that well; no bonuses, folks. Her family was going to take a financial hit because they figured on that bonus money as part of their income. So -- it can happen: You can be told a bonus is gone, overnight. Look up that recent post. Calling the money a bonus gives the employer a loophole for not paying it at some future date.

Up until we started our own company, my husband was in sales and he would receive a yearly bonus depending on the amount of product he sold and the profit of that product. The bonuses were not spread out over the year.

We are huge financial planners and would never, ever count on money such as a bonus. That is counting on money you don't have plus you have no idea how much it will be, if any.

We always treated it as such... a bonus which was usually distributed in our retirement funds and daughter's college fund.

So to answer your question.... NO we do not factor a bonus into our household income.

Instead of raises my husband's company is doing the same thing. He got a nice bonus this past year, now they are giving warnings from everything to 'you are wearing yellow socks' to the time he was one minute late (yes really-and they said he doesn't respect his job although he worked probably twenty hours a week overtime to help with the demand. They cut that also. His warnings would supposedly cost him a big bonus. It's really not fair, but they seem to be doing things like this all over the place. He just about kills himself for his job and it's not really even for the bonus points but because he has an honorable disposition and he is very helpful. In a word it well, don't know what to say other than RATS it's not fair.

Nope...never factor bonuses into our account/budget. If hubby gets them (my company does not offer them - it's HIS money to spend. Same with overtime (for both of us).

Oh boy that would be tough to budget around. My company does bonuses but they are given annually. If we get one (which has been the case for 10+ years for me) then we use it to pay down bills or cover things like home improvement projects.

What I would recommend is to figure out the difference between his prior paycheck and the bonus paycheck and put that into a separate savings account so it doesn't get frittered away over the year and you can continue to deliberately spend it or save it as you did before.

Back in the 90's when hubby was working at a big world wide company, was in the Union and had been there over 20 years, he was making $48,500 per year. BUT with bonuses and overtime, that was often mandatory, he made over $100K each year.

When the company redid their contract with the union that spring they decided that if a union worker was assigned to a department that was going to be terminated they could also lay off the union worker.

The engineers got to go through the company rehire program and got to keep their status, salaries, bonuses, every single thing they had for working there. All the other employees were union.

So if they wanted to get rid of the higher paid union workers they would put them all on a project that was going to be....terminated isn't the right word....they would build a pilot plant and send the engineers to manage it, they would hire regular people to work it once it was up and in production so the union workers would normally just be assigned to a different project.

The engineers would move and get moving costs, cost of living in a new area raises, all sorts of incentives for moving and taking on a new project, and the would come out much better with the change.

The union workers would normally move to a different project with no raise, no offers to move with the project, they'd just drudge along using their years of experience to adjust to a new job. They'd be right up to where they needed to be within a day or two.

But with this new contract the company would just lay them all off. No offers of a job, if they reapplied they got hired on as beginners again. Their years of experience were not acknowledged, nothing. They might be offered a job for minimum wage. It was nearly criminal what they did. The union officers about called a strike after they did this to a bunch of the longest members of their union so the company stopped it. BUT the people that had been laid off did not get their jobs back.

Many lost their homes, their vehicles, their credit cards, everything was repossessed. It was horrible for a couple of years as people struggled to find any sort of job at all.

Some of those union workers had masters degrees too. There were just so many of them out there looking for the same few job.

We lost everything. We've never really recuperated from it either. It's been almost 15 years. We decided to stay in Oklahoma because I was born and raised in OKC, my family is wide spread across the world but my immediate family is still here in OKC/Moore. I just could not see moving away. So we stayed, hubby's mom bought us a single wide mobile home and we've been living in it ever since. We have no credit still to this day because hubby ended up going on SSDI after a major heart attack and open heart surgery.

We have a couple of our grand kids now to raise too. Life is good, it was way better because money was play money. If I had it all to do over I would only count the base salary as income.

Anything that counted as bonus would indeed be play money after obligations were met. I'd pay off all credit cards, pay off at least one bill like a vehicle, I'd pay the car insurance for a year, pay the utilities in advance, do all that I could to make life easier for us in case something happened.

Then I'd plan a wonderful vacation and put the money aside in an account where it would gain a little bit.

I usually don't factor in bonuses unless I have a good history or sense that they will happen. I've been on both sides where bonus was good and bonus wasn't so good so I have learned to take what I get and consider it exactly what it is called "a bonus." The way it is structured is important too. Many times they are based on company performance and only a small portion on individual so that is a factor to consider as well.