How to Budget for a Bonus?
episode
DIY Money | Personal Finance, Budgeting, Debt, Savings, Investing
10 min
3 speakers
6 chapters
transcribed 1 month ago
Transcript
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Transcript generated automatically by AI and may contain errors.
What is the main topic discussed in this episode?
Hey, this is Allie, and thanks for listening to the show. Give us a five-star review where you listen and share this episode with someone who might need to hear it. Now, enjoy the show. Welcome back. Ladies and gentlemen, you're listening to another edition of DIY Money.
DIY Money. We're shaking, Logan. We're shaking with you. We talked a lot about your next transition, what things are going on in your life.
Well, right now I'm asking ChatGPT what insects were around during the dinosaur age.
If you listened to the last episode, you heard absolute ridiculousness about what is the... No, okay. It has to be probably... Well, I mean, Jurassic Park is obviously the most accurate thing of all time, so mosquitoes had to be there.
Velociraptor. Flies and mosquitoes, termites, cockroaches, beetles, dragonflies and damselflies. I didn't know that was such a thing. And crickets. That's what I was thinking of, the crickets. The crickets were around during the dinosaur age. There you go. So you will still see crickets, and those crickets were cricketing during the dinosaur age.
Alligators were too.
Clearly not the same cricket. That would be amazing.
How does Ryan describe his potential CPA bonus and timing?
But anyways, just like crickets, you'll see some of those mutual funds in those portfolios still. I still see them occasionally. If you have no clue what we're talking about, just listen to the last one. Yeah, well, you're listening. All right. What else is going on with me? Not much. I mean, seven months is a long time for our transition in my stepping away.
Should you budget a possible bonus now or treat it as unexpected income?
I just look forward to, again, pouring into things like this. We're getting ready to launch a new site. I know we've talked about that before, but it's actually legit now. We're getting ready to launch a new website. I think we'll get ready to pour into some more content. Some swag, I've heard. Some swag. That's right. That's right. Some swag is coming soon. So I'm just looking forward to doing more of that, that kind of stuff. All right. First of all, let's pause for our sponsors.
How did Quint personally handle one-time bonuses and taxes?
And, of course, our title sponsor, Jewel Financial, J-O-U-L-E financial.com. Visit us on the web if you have some sort of complex problem. And keep the questions coming. The questions are what make the show. If we use it on the show, we'll send a $25 Amazon gift card. You can send those questions to podcast at DIYmoney.org. That's podcast at DIYmoney.org. We got a question today from Ryan. What do you got, dude?
Hey, DIY Money. My name is Ryan from Kansas City, Missouri. I'm going to work for a public accounting firm after graduation and will receive a sizable bonus if I pass my CPA exam sections before I start. I'm on track to pass these exams and believe I will receive the bonus. Should I plan to budget for this bonus now or treat it as unexpected income just in case I don't pass my exams and don't receive the bonus? Thanks.
Okay, Ryan, I love this. I've had years in my life where I've gotten a quote-unquote bonus. Not really, but it's been a distribution from the business that we were planning on taking and so forth at a certain period of time. Should we hit certain metrics? Blah, blah, blah, blah, blah. So I'll tell you how I did it. I certainly didn't account for it as income at all, meaning I didn't put it into my budget. I didn't say, okay, this is an X number of dollars that's coming, and I'm going to spread this over 12 months, and I'm going to adjust my lifestyle accordingly. Nope, not at all. I simply took that amount. I lessed the taxes that I might need to owe on that. Ours was a distribution, so I would basically owe taxes at the end of the year.
Maybe you will be taxed, and it will come into your paycheck later. So that's something to be aware of. Also, we'll circle back around on this, but make sure you understand how that could impact your 401k contributions if you have done deductions based on maxing out your 401k and now you're getting a bonus through payroll. But nonetheless, I would simply evaluate this amount of money and look at your goals and accelerate the ones that you are putting money towards to in your margin.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:02–1:11
2
How does Ryan describe his potential CPA bonus and timing?
1:11–1:32
3
Should you budget a possible bonus now or treat it as unexpected income?
1:32–2:00
4
How did Quint personally handle one-time bonuses and taxes?
2:00–4:38
5
How can a payroll bonus affect 401(k) contributions and withholding?
4:38–5:38
6
What is the recommended way to allocate a bonus toward debt or goals?
5:38–10:33