Happy Birthday Canada, and happy you – the company just paid you a bonus!

27 Jun

red couchTo celebrate Canada’s 150th birthday, Canadians may have a seat on a red couch that is travelling across the country to collect their stories. If the couch comes to your community, you get to sit on the couch and tell us what Canada means to you.

In Ontario, the government is bringing a giant rubber duck (19 metres high) to Toronto for the July long weekend. Visitors to the waterfront festival are invited to take selfies in front of the duck. This rubber duckie will also travel to Midland, Owen Sound, Brockville, Amherstburg and Sault Ste. Marie.

big yellow duckThese are a couple of the crazier events taking place in 2017. It is a special birthday of 150 years for our country and does call for celebrations. Getting a bonus from work is also cause for celebration. When advising clients, I often get asked about what to do with a bonus.

Whenever you get a bonus, it’s good to have a plan of what to do with this windfall so that you have some reward for your hard work, yet also contribute to your long-term financial goals. In the Cash Flow Plans I do for my clients, I often recommend spending up to 50% on “fun” or something nice for yourself, and allocating the remaining 50% to the client’s plan.

I doubt you need suggestions for the fun spending. However, some suggestions for the serious half of the payout are:

  1. Top up your RRSP contribution, which in itself can result in more money in the pocket as it means you are reducing income tax either in the form of a refund or paying less next April 30. Remember that you will owe tax on the bonus itself. ☹
  2. Make a contribution to your TFSA. The growth in this investment will never be taxable.
  3. Put an extra payment on your mortgage to reduce the total interest paid on this very high debt.
  4. Pay down other debt – especially debts such as your credit cards which incur very high interest and reduce your ability to spend elsewhere.
  5. Build up emergency savings of three months’ salary for any unexpected disruption to your income.

Cash Flow Plans empower you to fund financial goals and dreams that have meaning to you and your family. While the plans do start with the numbers, coaching is a significant component of the success of the plan. If accumulating wealth was only about arithmetic, all of us with a Grade 8 education would be financially secure and stress free. In fact, it is your behaviour with money that has more impact on achieving your short- and long-term goals.

A tax refund is extra cash, much like a bonus. The link below offers some wise suggestions on what to do with a tax refund.

Tell me what you would do with a $10,000 bonus. Take the survey at https://www.surveymonkey.com/r/SLRN2BY. I’ll share the results with all who complete it.

Is it time for fireworks to celebrate a bonus? Contact me at 416-939-2000 or mheenan@assante.com for some suggestions that are personalized for your Cash Flow Plan.

It’s just good advice.