Some things are certain. Some things aren’t certain. Certain: death, taxes, my hair loss. Not certain: my Nobel Prize Application, Dick Clark’s age, and bonuses. Bonuses? Yes, its that time of year again when many Americans turn their watchful eyes to their potential bonus payouts come year end. I have seen bonuses both greatly enhance and destroy peoples’ lives.
Employers are smart (my employees may not think so), they know that you will generally give more effort when they tie your compensation directly to your results. Smart employers pay bonuses quarterly. Employers are let off the hook if you don’t reach your goals, but oddly enough we don’t let ourselves off the hook. Most people count on their bonuses despite the fact that they aren’t guaranteed.
I have a client whose bonus doubles his base pay. He is forced to only depend on the base pay. If he were to depend on the whole thing he could be in real trouble. It would be catastrophic. He does it the right way. Most people do it the wrong way.
Check yourself. Make sure that you are not putting too much faith in an uncertain bonus.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.