Bonuses are great, but are you making the most out of yours?

• Two dangers of a free money mindset (02:19)
• Plan ahead what bonuses will go toward (04:08)

Quote for the episode: "Any portion (saved) then benefits you in those two ways- more saved, less to replace long term."

Securities offered through TFS Securities, Inc., Advisory Services through TFS Advisory Services, a SEC Registered Investment Advisor Member FINRA / SIPC.  TFS Securities, Inc. located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Welcome to the Enjoy More 30s: Family Finance

podcast, the only podcast dedicated to making life more

enjoyable for young families by hitting on the financial topics

that tend to weigh on us, stress us out and distract our focus

from simply enjoying life.

Welcome to the Enjoy More 30s: Family Finance

podcast. This is the second series now, which is called

"Your Money Multipliers". So unlike the first "Your Money

Mindset" series, where we were focusing more on higher level

concepts for how we should approach money and finances

really as a whole, namely viewing them as a tool to help

remove anxiety and make life more enjoyable, this series will

focus on more specific topics that affect your finances. The

end goal, though, is really still the same. Any improvement

that we can help make in any area that helps lessen the

anxiety, creates more confidence for us to focus on making life

more enjoyable for everything kind of outside of that.

Today's episode is called "Bonuses Aren't Free Money". And

what we're going to cover is what you need to know about how

to approach your bonus, and what you can do to have it make the

greatest impact for you. Now, we've all been in the position

where we have that pair of pants that we own, we don't seem to

want to throw it away. But you know, it's usually a pair of

jeans or something like that, that you have crumpled up. And

you know, once in a blue moon, they seem to fit the occasion.

And you put them on you, they're a bit uncomfortable, because you

haven't worn them in a while, and you wind up sticking your

hands down to the pockets to get them situated, fitted correctly,

what have you. And lo and behold, there's money in the

pocket. So you pull it out all excited, because hey, you just

found free money. The first thing that we naturally think of

next- 'that's going to be just enough to buy __' and then you

can kind of finish the sentence. And the money is gone. No one's

reaction is, "Hey, that's great. I can't wait to get down to the

bank and make a deposit." Now, if I'm a financial advisor, and

I don't have that reaction about wanting to run down to the bank

with that $10 bill and put it in my checking account, then you

and everybody else certainly does not have that reaction

either. And the thing is, it was always our money, we just didn't

know we were finding it until just then. And the emotional

excitement and surprise, influence the reaction that we

had.

So what you need to know- finding money in your pocket is

surprisingly similar to how a lot of people tend to treat the

bonuses that they receive. They know they're coming, not quite

sure of the amount most times. But when they do come, it can

very much feel like free money. If you treat it this way,

though, you are negatively affecting yourself in actually t

o ways. The first is pretty o vious- you're missing a p

tential significant annual o portunity to save more money a

d reach your goals more q ickly. The less you save, the l

ss you have long term. So t at's pretty straightforward. T

e second, though, is somewhat l ss obvious. When you forego s

vings, you are also getting a customed to spending more. So w

have clients that may tell u , "Hey, I always just treat t

at as, you know, extra money. I don't need to live on that in r

tirement, you don't have to w rry about that. Because it was j

st, you know, it's free m ney." Now, if you stop and t

ink about what you spent it o , though, which is what we do w

th clients, that's often not t e case. Let's say you spent it o

vacations- do you not want to v cation at all in retirement? H

w about home renovations- are y u never going to want to u

date your home again over a 20 t 30 year retirement? Whatever o

r current equivalent is to g andma wallpaper and s

ipcovers, I'm sure you're g nna want to get rid of it at s

me point.

So basically, you get hit twice. You're going to have less saved

up, which is pretty obvious. But you will simultaneously, and

more importantly, be accustomed to living on more because of

that bonus. And a lot of the things that you're spending that

bonus on now, you're probably going to want to do in

retirement. Which means that income does also need to be

replaced to have the retirement that, you know, you're going to

want to have.

So what can you do? The answer is to plan ahead of time what

you will do with your bonus. And it absolutely does not and

should not be to save 100% of it. Now, let's say you received

a $10,000 bonus, for example. You could save maybe $5,000, go

on vacation for another $3,000, and put $2,000 towards a home

improvement, just as an example. But any portion that you wind up

saving above what you otherwise would have done can be hugely,

hugely significant. Another way, which really requires a little

bit more of an advisor to implement, is that we have some

clients that when we do their projections, it turns out if

they just save 100% of their bonus, they don't have to worry

about saving any other amount of their normal paycheck to reach

their goals. And some of them really, really liked this

mentality of, "Hey, this is free money that I get extra. Sure,

you can have that you could put that towards my goals, since

it's really not part of the normal pay that I get every

month anyhow. And so if I just can have the freedom to spend my

monthly paycheck kind of however I want, and you know, this bonus

that just comes randomly once per year that I don't really

think about can take care of me reaching all the goals and doing

everything I want to do, then spending my paycheck anxiety

free would actually make me the happiest."

So there are a number of different ways that we can

approach it. But using some approach to have this bonus

reach our goals and reduce our anxiety in the process is what

we're trying to accomplish. Overall, there are different

ways to approach it. But anyway you happen to look at it, if the

end result is you save more money than you otherwise would

have, then you're giving yourself those two advantages.

One, there will be more saved down the line and you will reach

your goals more quickly. And two, and actually more important

in many, many cases, what you are accustomed to living on, and

therefore what you need to replace in retirement, will be

So a quick summary of today's meeting. One- bonuses are not

free money. You need to plan for what you want to do with those

funds ahead of time. Two, if you treat it as free money and spend

it- again, you're hurtin yourself in two ways. Less save

less.

, and more to be replaced long term. Three, you do not have t

save all of it in your pla . Any portion then benefits

ou in those two ways- more saved less to replace long

Thanks for joining us today. Because a lot of this can be

very complicated, and a lot of times you may leave an episode

and say, "Hey, you know, I really need a little bit more

information for how it applies to my situation", we've also

added an 'ask Joe' section to the website. So if you go to

enjoy more 30s .com, that's enjoy more three zero s .com,

you'll now find an 'ask Joe' button on the lower right hand

side where you could submit questions. We'd be happy to try

to help and answer anything that we can to give you that

additional resource going forward.

If you enjoyed this episode, as I always say, please please make

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rankings so more people like you can find us. Now the next

upcoming episode is entitled "Live It Up! Vacation Accounts".

That will cover how to ensure we take the time for vacations, and

at the same time maybe even improve ourselves a little bit

financially in the process. So thanks very much as always, and

I'll talk to you again soon.

The conversations on this show are

Joe's opinions and provided for general information purposes

only. They do not constitute accounting, legal tax or other

professional advice for your specific situation. You should

always seek appropriate advice from a financial advisor,

accountant, lawyer or other professional before acting upon

any content or information found here first. Joe is affiliated

with New Horizons Wealth Management LLC, a branch office

of TFS securities Inc and TFS advisory services an SEC

registered investment advisor member FINRA/SIPC.