Six rookie mistakes to avoid with your first bonus

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Six rookie mistakes to avoid with your first bonus

Six rookie mistakes to avoid with your first bonus

How To Afford The Life You Want

Six rookie mistakes to avoid with your first bonus

Photo: Shutterstock.com So you don’t have to pat your pockets and wonder where all your money went BY RYAN ONG The first time you see your bonus pay-out in your bank balance can seem stunning and euphoric at the same time. Look at all that money! But suddenly, a mere month later, you’re pacing around wondering where it all went (while silently admiring that pile of new purchases sitting in the corner of your room). Here’s how not to flush that bonus away, along with their respective levels of severity. 1. DON’T leave the whole bonus in your regular bank account. Once you’ve cashed the cheque, decide a fixed amount that you will allow yourself to spend. As a general rule, 30 per cent is a healthy number. Leave that in your current bank account, and transfer the rest to a separate savings account, or somewhere you cannot easily access. The surest way to end up

Photo: Shutterstock.com It doesn’t matter if your year-end bonus is supposed to be almost routine — you should never make assumptions about receiving it. As far as your finances are concerned, never rely on your eventual bonus to clear up an outstanding debt, or to make up for a chunk of savings that you want to spend right now. Level of Severity: 4/5 It’s like jumping out of an airplane assuming someone’s got a spare parachute on them. Splat. 3. DON’T be lured into buying something that exceeds the bonus

Photo: Shutterstock.com Big ticket items, like a holiday in Europe, might seem doable when you get your bonus. Even if your S$5,000 bonus doesn’t cover the whole cost of the S$10,000 trip, it sure makes that getaway seem more affordable. After all, you have the half the amount in your pocket already. Thinking this way will turn your bonus into a liability. Taking that holiday will change your S$5,000 bonus into a S$5,000 debt — and you would have been better off without it. Level of Severity: 5/5 The worst (and dangerously easiest) thing you can do with more money than you’re used to having is incur even more debt than you’re used to having. 4. DON’T go shopping the very same day you get the bonus

Photo: Shutterstock.com Give yourself time to cool off. You are no doubt excited by this windfall, and your head is swimming with desire and a craving for new things (not all of them worthwhile). When you’re cash-drunk, you are a prime target for every sales person and store display you come across. It’s wiser to set aside the bonus, and prevent yourself from touching it for the next week or two. By then, you will have formulated a more rational plan for the money to avoid a spending hangover. Level of Severity: 3/5 Put down the designer bag with the French name you can’t pronounce and step away from the store with your hands up. 5. DON’T invest your bonus in something risky

Photo: Shutterstock.com Beware the “easy come, easy go” mentality, which often comes with an unexpected bonus. When you feel the bonus is a stroke of fortune, it’s easy to look at it as “free money”. It might go into a dubious experiment with penny stocks. And if the gamble fails, it could feel as if you haven’t really lost money. After all, it was not money you expected to have in the first place. Don’t be stupid. Everybody regrets losing money. The truth is, because this is your first bonus, you can’t afford to lose all of it, so don’t stack the odds against yourself. A more prudent approach would be to save up during good times, so that when hard times come a knockin’ as they always do (like if you can’t work for any reason and don’t get paid for a few months) you’d have savings to tide you over. One easy way to do this is to talk to a financial

Photo: Shutterstock.com Resist the urge to loudly announce the arrival of your proud first bonus. By all means, go out and celebrate with a few close friends or take your parents out for lunch, just don’t go overboard and feel the need to treat everyone you know. Don’t flaunt your big cheque in the office either — this can cause friction between co-workers, and your boss will not appreciate having to deal with any accusations of bias (worse if said complaints eventually come from you when you realise yours isn’t the biggest cheque in the room). Level of Severity: 4/5 You like the people in your life, right? Let’s keep it that way. Right this way for more stories on how to afford the life you want.

Source: TODAY

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