Artwork for podcast Enjoy More 30s: Family Finance
Bonuses Aren't Free Money | Series 2.1
Episode 115th March 2021 • Enjoy More 30s: Family Finance • Joseph P. Okaly
00:00:00 00:08:19

Share Episode

Shownotes

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.

Transcripts

Voiceover Audio:

Welcome to the Enjoy More 30s: Family Finance

Voiceover Audio:

podcast, the only podcast dedicated to making life more

Voiceover Audio:

enjoyable for young families by hitting on the financial topics

Voiceover Audio:

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

Voiceover Audio:

from simply enjoying life.

Joseph Okaly:

Welcome to the Enjoy More 30s: Family Finance

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

concepts for how we should approach money and finances

Joseph Okaly:

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

Joseph Okaly:

remove anxiety and make life more enjoyable, this series will

Joseph Okaly:

focus on more specific topics that affect your finances. The

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

more enjoyable for everything kind of outside of that.

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

and everybody else certainly does not have that reaction

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

excitement and surprise, influence the reaction that we

Joseph Okaly:

had.

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

though, you are negatively affecting yourself in actually t

Joseph Okaly:

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

Joseph Okaly:

tential significant annual o portunity to save more money a

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

r current equivalent is to g andma wallpaper and s

Joseph Okaly:

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

Joseph Okaly:

me point.

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

more importantly, be accustomed to living on more because of

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

retirement. Which means that income does also need to be

Joseph Okaly:

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

Joseph Okaly:

want to have.

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

hugely significant. Another way, which really requires a little

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

about saving any other amount of their normal paycheck to reach

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

everything I want to do, then spending my paycheck anxiety

Joseph Okaly:

free would actually make me the happiest."

Joseph Okaly:

So there are a number of different ways that we can

Joseph Okaly:

approach it. But using some approach to have this bonus

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

end result is you save more money than you otherwise would

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

therefore what you need to replace in retirement, will be

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

less.

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

additional resource going forward.

Joseph Okaly:

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

Joseph Okaly:

sure to subscribe and review us on Apple podcasts or wherever

Joseph Okaly:

you listen. There are literally millions of young American

Joseph Okaly:

families out there I'm trying to reach and help just like you.

Joseph Okaly:

Every time you leave a review, every time you click a star,

Joseph Okaly:

every time you subscribe that helps us show up higher in the

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

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

Joseph Okaly:

at the same time maybe even improve ourselves a little bit

Joseph Okaly:

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

Joseph Okaly:

I'll talk to you again soon.

Voiceover Audio:

The conversations on this show are

Voiceover Audio:

Joe's opinions and provided for general information purposes

Voiceover Audio:

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

Voiceover Audio:

professional advice for your specific situation. You should

Voiceover Audio:

always seek appropriate advice from a financial advisor,

Voiceover Audio:

accountant, lawyer or other professional before acting upon

Voiceover Audio:

any content or information found here first. Joe is affiliated

Voiceover Audio:

with New Horizons Wealth Management LLC, a branch office

Voiceover Audio:

of TFS securities Inc and TFS advisory services an SEC

Voiceover Audio:

registered investment advisor member FINRA/SIPC.

Links