How I Spent My Year-End Bonus
The first year-end bonus I received was unforgettable. I was 28 and working as a bank relationship manager, earning a steady income but having never handled such a substantial sum of money in one go, and I thought I had carefully decided what to do with it. But looking back, my decisions were a mix of heartfelt intentions, practical choices, and some missed opportunities.
1. Sharing Success With Loved Ones
My first thought was about my parents. Growing up, I witnessed their sacrifices to ensure I had every opportunity. It felt only right to give back, so I allocated one-third of my bonus to them. The joy it brought to both my parents and me was priceless. It was a moment of gratitude that I’ll always cherish. If you’re like me, starting to accumulate wealth in your late 20s or early 30s, sharing your success with loved ones can be a deeply fulfilling way to use your bonus.
2. The Splurge
Next on my list was upgrading my phone. At the time, I was using a Huawei phone. However, the US government’s restrictions on Huawei had made its long-term usability uncertain, so I decided it was time for a change. I splurged on a new iPhone. While it was a practical decision driven by reliability and convenience, I couldn’t help but feel a twinge of guilt for spending a portion of my bonus on a luxury item.
3. The Missed Opportunity
The rest of my bonus? It went straight into my savings account. I had big goals—saving for a future wedding and home renovation—but I had no clear timeline. For three years, the money sat there, earning a mere 1% interest per annum (or less). Eventually, I reinvested it into better instruments, but in hindsight, I realised I could have put it to more productive use sooner.
Fast forward to today, I look at year-end bonuses with a different lens. Especially as a younger accumulator, many of us in this phase of life, juggling multiple priorities such as planning a wedding, buying a house, renovating a home, or starting a family, can feel overwhelming. Add to that the income tax due next year, and the excitement of a bonus can quickly give way to stress. But it doesn’t have to be that way. By planning thoughtfully, your bonus can be a powerful tool to move closer to your goals.
4 Essential Lessons for Spending Your Year-End Bonus Wisely
Lesson 1: Balance Short- And Long-Term Goals
While it’s tempting to focus solely on immediate goals, it’s important to think long-term. Developing the habit of consistent savings, rather than relying on large bonuses, can help you achieve financial stability. Use your year-end bonus to boost your emergency fund if it isn’t enough; it is especially important in uncertain economic times. If you have high-interest debts like credit cards or student loans, paying them down can free up cash flow and reduce financial stress.
Lesson 2: Don’t Let Uncertainty Hold You Back
Life is full of uncertainties, but avoiding investment due to unclear timelines can mean missed opportunities to grow your wealth. If I had placed my savings into a low-risk investment instrument like a money market fund, I could have earned better returns while maintaining flexibility for my short-term goals. For example, if you’re planning a wedding, saving for a house, or budgeting for a home renovation within the short term (1 to 2 years), instruments like fixed deposits or money market funds can be great tools to balance safety and growth.
Lesson 3: Set Aside for Taxes and Future Commitments
For younger accumulators in higher income brackets, it’s important to remember that a higher income also means higher taxes. If you’re unsure how much income tax you’ll owe next year, use the “Individual Income Tax” calculator on the IRAS website here. Setting aside a portion of your bonus for your income tax can save you from scrambling when it approaches. Additionally, if you’re planning to start a family, the costs of raising young children can be significant. Allocating part of your bonus to these future commitments can provide a much-needed financial cushion.
Lesson 4: Reward Yourself Responsibly
Once the essentials are taken care of, it’s perfectly fine to treat yourself. Whether it’s a vacation, a new gadget, or an experience you’ve always wanted, rewarding yourself can bring joy and motivation. The key is to indulge within reason, ensuring it doesn’t derail your financial goals.
Conclusion: A Balanced Approach to Financial Growth
When I received my first year-end bonus, I saw it as a chance to fulfil all my wishes in one go. But over time, I’ve realised that true financial growth comes from thoughtful planning and consistent action. Whether it’s setting aside funds for taxes, building an emergency fund, or investing for short- and long-term goals, every decision matters.
At Providend, we’ve spent the last 23 years guiding clients through these decisions with one guiding principle: life decisions before money decisions. Instead of chasing the highest returns, we focus on giving clients the highest probability of success in reaching their life goals. So, as you receive your year-end bonus this year, take a moment to reflect. How can this money serve you now and in the future?
The balanced approach is to use our money to allow us to live a life of purpose as if life will end tomorrow, while setting aside enough to expect a long future ahead, well anticipating we’ll live until tomorrow. With a clear plan, your bonus can become more than just a reward. It can be a stepping stone to the financial freedom and security you’re working so hard to achieve.
This is an original article written by Joyce Chng, Client Adviser at Providend, the first fee-only wealth advisory firm in Southeast Asia and a leading wealth advisory firm in Asia.
For more related resources, check out:
1. Video Story of Joyce Chng: From Designing Spaces to Nurturing Lives
2. To Live the Good Life, Make Life Decision First Before Wealth Decisions
3. How to Make Life Decisions
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