Bonuses won't solve all your financial challenges

true
By Sylvia Juuko

It is not unusual for employees to take for granted the power of money that is within their reach.

This could apply to the allowances you are paid for working off station or travelling abroad and the annual bonuses you earn for good performance.

It can also apply to the income you earn periodically or the payrise awarded to excellent performers.

Since this money is expected, there is a tendency to get into a comfort zone and simply regard this income as your only financial plan.

For instance, whenever the issue of saving or investment comes up, you convince yourself that the only trigger to sort out your finances is that elusive promotion or bonus. If you do not get that opportunity, you have an excuse or someone to blame for not getting ahead with your money (in most cases, it is your employer’s fault).

In the meantime, you are doing all it takes to spend small amounts of money on a daily basis, ignoring the alternatives that you could have put that income to.

This expenditure that could be saved is usually over and above the basic necessities needed for your household to survive.

While these small but consistent types of expenditure may be negligible, it eventually adds up over a period of time. If you fall under the category of employees who receive some form of allowances or bonuses during a specified period of time, these should not blind you to the fact that they can be scrapped overnight.

There are times when organisations do not perform well and these payments have to be cancelled. This should signal the importance of working on a plan that is more sustainable.

Therefore, you should not get into this comfort zone to the extent that you cultivate an entitlement mentality. This sense of entitlement clouds our judgment to the extent that such payments like bonuses dominate conversations in office corridors this time of the year.

You can avoid this level of anxiety if you plan and manage your personal finances prudently such that you treat the bonus as a boost to your income and one that you can live without.

Instead of trying to second-guess your employer, this time would be spent more usefully planning for and working with what you already have.

As such, you do not have to subject yourself to financial stress year after year, trying to figure out if that bonus will materialise or not.

Start with your current earnings to determine whether you need to increase your income streams or you have some extra to invest in assets and at the same time reduce extravagant expenditure. This way, the more predictable earnings from your investment can be regarded as your ‘bonus.’ This means that irrespective of the amount you receive in bonus, sentiments like “it is too small” need not apply because it is not considered a lifeline during this time of the year.

That notwithstanding, one cannot ignore the fact that the reality of your current financial situation will influence how you utilise your windfall.

If you have a high consumer debt to pay off urgently, it is inevitable that you will use your bonus to clear some of it. In another scenario, if you are barely making ends meet, you have a short-term relief to meet your consumption needs.

More importantly, if your bonus can be saved or invested, it is a more sustainable way of making this windfall work for you. In all these scenarios, it is important to remember that any choice you make about money entails a trade-off.

Whatever you opt to do, there is an opportunity foregone. That is why you have to take responsibility for every choice you make about money.

The writer works with Bank of Uganda
Personalfinance222@gmail.com