October 5, 2007, 7:00 am

Don’t budget your bonus

by: The Financial Blogger    Category: Miscellaneous
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Many people think that their bonus is somewhat related to their performance but is definitely a due. They think that their employer owes them extra money at the end of the year; it’s like a gift tradition right before Christmas. Well I have a bad news for you all; Santa Clause might be very cheap in the upcoming years.

No Bonus

For those who think that overall economy is going find, take some more pills and go back to sleep because you don’t want to wake up in the middle of the storm. You rather dream that you are living in a perfect world by not looking at your investment portfolio.

For those who are starting to be more worried about what is going on, I would suggest them that they rearrange their finance accordingly. Not counting on your bonus would be one of the very first steps you may do.

A bonus is usually offered to people that perform into their daily work throughout the year. However, the size of the bonus depends solely on the company’s financial results. As you know already, nobody can predict the future, nor the next year profits for a company. Therefore, you could never be 100% to receive what you “technically” deserve.

I recently spoke to one of my friend who does not have the chance to work in a financially stable industry. During the previous years, he was doing a really good job and getting quite a piece of the cake of profit through his bonus. After a few years, he started the bad habit of counting his bonus into his budget. RRSP’s, renovation, trip to Europe and even a cash down on a new car for this year. After talking to him last week, I guess he will keep rolling his old Volks!

He was reunited with his colleagues for “an announcement” by his manager. Hi boss announced that the last trimester doesn’t sound too great and it will affect their business number for the whole year. In fact, there is a possibility of never seeing that so cool cheque with a few zeros on it this year. A big zero, this is what he was told to expect. Was it a strategy by high management to bring expectation down after several good years or was it the truth? Nobody can tell at the moment (unless you are preparing the financial statements for this company!).

I felt very bad for him as I know that he was planning on this extra cash to buy a new car. I thought it would be a great lesson to share with my readers. You may think it will not apply to you, but I would strongly suggest that you think twice before you erase this post from your short term memory. Christmas is surely coming this year, but it might be only for your children.



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My company is likely not giving a bonus either. You’re right that you shouldn’t budget a bonus that may not happen, but in some cases the bonus is based on personal or team performance, in which case the employee has a lot of control over whether the bonus happens. Sales people for example often have bonuses tied heavily to personal performance.

It’s just a risk management thing. People may not have jobs in six months either or the stocks may die, so that’s why they need to build some resilience to those kinds of downturns.

by: The Financial Blogger | October 5th, 2007 (11:09 am)

No bonus sucks, nevertheless, it doesn’t mean that it is granted to you. Even if you are a great performer in your team, the overall picture might not be as good as your performance.