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I’ve observed quite a significant number of people plan their finances around receiving the bonus component of their compensation. And when their employer doesn’t give the expected bonus — due to whatever reason ranging from the economy to performance — their financial plans are thrown out of gear.
If you look at the terms and conditions of your employment, the bonus component is usually listed as being “up to a certain figure.” And up to can mean anywhere from zero to that figure. A bonus is not promissory in nature.
It’s therefore a good idea to not rely on your expected bonus when making your financial plans. Or, you can do better. Make two plans — a best case plan with your expected bonus and a worst case plan without it. And expect the latter to be the reality.
What do you think?
Tip Tuesdays is my initiative to share practical personal finance tips — every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.
Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.