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Should you gamble on a year-end bonus?

August 13, 2008

What if you were able to have a choice in your pay structure? Would you choose a guaranteed salary with a smaller bonus? Or, would you take your chances with a lower pay, but the opportunity for a large bonus at the end of the year?

Some companies are giving their employees that choice.

I think it would be a difficult decision. After all, I like the security of knowing exactly how much money I have coming in for the year. The thought of basically betting on your final income for the year is scary.

On the other hand, the thought of a whopping big bonus at the end of the year that could potentially net you more money overall is very enticing.

How does one make a decision like this?

I think you have to start by looking at your overall financial situation. First, are you in a position that you can comfortably pay all of your bills on-time and in full. Are you saving at least 10 percent of your income and putting enough into your retirement funds? You may need to talk to your financial planner regarding this area.

Furthermore, look at how you use your year-end bonus. Do you use that money to pay necessary bills such as once a year tax payments or insurance premiums? Or, do you mostly use your bonus as fun money? How does your bonus impact your financial picture?

If you’re a bit of a risk taker and overall you are in a good, solid financial situation, it may not be detrimental to opt for the lower salary and higher bonus.

However, if you are struggling financially, I would strongly consider going for the guaranteed money.

If you are unable to manage your bills, or if you are someone who counts on every single penny to pay for life’s necessities, you probably shouldn’t gamble on your income.

What would you do if you had this option? Why would you make that choice?

Written by admin · Filed Under Misc. 

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