Changed Mindset

The following is a staff writer post from MikeS.  He is a married father of 2.  So, with the cat, he ranks number 5 in the house.  He loves numbers and helping people. Please leave any questions or comments below for either Mike or Crystal.

I like how my thinking has changed over time.  Gone are the days when I would just spend my annual bonus like a drunken sailor.  Not that I ever was a drunken sailor, but you get the idea.

I just found out my annual performance bonus for the year.  My wife and I had plans for it, we were thinking of putting a screened-in deck on the back of our house.  Instead, we are doing the very boring thing of just putting it into savings.  That would not have happened 10 or 15 years ago.  It’s nice to see the change.

Annual Bonus

It’s not technically an annual bonus, but I have received one every year.  I have performed well enough to merit one every year that I have been with the company.  We had been given warnings that the bonus pool this year was not going to be as big as it had been in years past.  The company experienced some headwinds and expenses are under-pressure.  So, being a numbers guy I did look at a couple of scenarios for what I might receive.

My bonus last year was $15,000.  So, I ran two scenarios, a best and worst case.  My best case was for a $10,000 bonus, ⅓ of what I received last year.  My worst case was $7,500, ½ of what I received last year.  The bonus this year was closer to the best case, $9,000.  More money is always nice and thankfully I don’t use my bonus for living expenses.  Of the $9,000 though, only $4,860 makes it into my hands.  Between taxes and my 401K contributions, nearly half of my bonus disappears.

The Deck

When I began to hear the rumblings from management about the bonuses for this year, I prepared myself that the screened-in deck might not happen.  My off-the-cuff estimate for the cost was somewhere between $5,000 and $10,000 with the higher amount being more likely in my mind.  So, a net bonus of $4,860 is not sufficient in my mind.  I did not want to pull too much additional from savings to make up the difference.  My wife and I talked and she was in agreement.

We will postpone the deck until next year.  If my wife babysits again during the next school year, then a good chunk of the deck project can come from that and we won’t have to worry whether the company has a good year or not.

Where’s the Money Going?

So, I know I said savings, but where?  Some of our spending categories have balances a little lower than I would like, so I plan on shoring them up a little.  The car bucket is getting an infusion after a couple of repair bills brought that bucket down.  The kids category is also receiving some of the bonus.  I use this bucket as sort of a catchall for the kids.  Anything from clothes, to activities, to entertainment is pulled from this category.  The older the kids are getting, the more we seem to want to do things.

I am also transitioning all of my insurance to annual payments.  My disability insurance and the term insurance my wife and I have were all on monthly payment schedules.  I can save a little bit of money every month by paying them all annually.  The bonus money helps me to pay off any amounts that would be due before the next policy anniversary.  I’m not going to save a huge amount of money, but I’m still saving some.

Changed Mindset

As I said in the beginning, before I found my financial sanity I probably would have spent my bonus and not thought twice about it.  Now, my thinking is different.  I am more concerned with what something will do to my financial position and long-term goals rather than what an immediate benefit might be from a purchase.  Now, if I could just travel back in time and share that wisdom with my younger self.

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