Bonuses/Commissions/Tax Returns – Where Do They Fit in Your Budget?

Every once a while in your budget, there is money that doesn’t quite fit. Whether it be bonuses, tax returns, or commissions, there are monies that aren’t regularly included in the monthly budget. When this happens, one needs to figure out where they fit in. They should never be treated as “extra” income, to be spent frivolously – instead, they should be planned wisely into the budget as best as possible. If planned for, this additional incomes can be used to pay off debt, paid into a principal balance, or invested into an account, depending on what your financial goals are.

Tax Returns

The first additional money to consider is tax returns. If you are balancing your paychecks monthly accordingly, your tax returns shouldn’t be substantial – anywhere from $1,500 to $2,500 every April. However, this can still be utilized in your budget. If you have excess debt, tax returns should be applied towards that first. After that, you can apply it towards savings, or additional purchases that you need to make. Don’t use it towards something frivolous, like a new TV, computer or toys. But if you need to repair a car, purchase a new appliance, etc. then those purchases can be made. Remember that the budget is in place for a reason, and you should have an emergency fund in place, as well as a car fund and household fund to pay for these items. It takes time, but it is possible.

Commissions – Salary Based

Regular commissions are trickier to implement into a regular budget because they are more frequent than a tax return. There are 2 types of commissions to discuss under this category – commission only salary, and salary plus commissions. These are two very different things. The first should be treated as an infrequent income when writing your budget, which is discussed in this post. To summarize, figure out your base income by using your lowest paying month from the previous year. If you have less than enough to cover your bare minimum, prioritize by paying for things like food, shelter and transportation. The other items can wait. If you get a larger than normal paycheck, then it should be spread out among the rest of your items in the budget. You can spend more, save more, and pay off debt. If you have debt, it should always go towards paying down your debts first. This covers irregular income-salary based commissions.

Commissions – Bonus Based

If you have a job that earns commissions, in addition to regular salary, those can be tricky to implement in your budget. We’ve talked before about spenders and savers – depending on your mindset, you may want to save it all, or blow it all at once. The wise choice would be a combination of the two, implementing it into areas of the budget. Plan for what you need to do with your “bonus”, no matter how big or small. Prioritize it, meaning don’t use it to pay your basic bills (electricity, car payment, etc). Those should be accounted for in your regular monthly budget. Instead, apply it towards extras in your budget, like debt payoff. Use it to save more, like a vacation saving fund or for a new TV you’ve been wanting to buy. What not to do is blow it all at once.

If you have extra money in your budget, whether it be tax returns, bonuses, or commissions, remember to use it wisely. Plan for how you are going to spend it. Don’t let it be a big chunk of money that you blow through in a spending frenzy. Instead, use wisdom, and financial literacy. Plan in advance, and use the “extra” monies to work for you in your budget. By doing so, you’ll find yourself in a better financial situation, instead of wondering what happened at the end of the month.