Save Your Bonus

Okay it might be a little late for this, but if you haven’t spent a bomb on your Christmas presents yet, read on.

There’s a reason why the government wants most Singaporean companies to pay out their Annual Wage Supplement (AWS), more commonly known as the 13-month bonus, in December. SO YOU CAN PAY IT RIGHT BACK INTO THE ECONOMY BY SPENDING IT ON STUPID PRESENTS THAT NO ONE REALLY LIKES. Okay, I kid. I’m all for giving presents and letting a little loose during the festive season. (So what if your mom will never ever use that waffle maker you bought her – it’s the thought that counts, right?) But I’d like to highlight that this insidious little trick actually causes you to spend a lot more than you otherwise would during Christmas. So because it’s Christmas, I’ll tell you how to get around that psychological barrier, afford to buy your presents, AND still get rich by saving most of it.

This is how most people think: “Wow an extra $3,000! I just got paid like 2 weeks ago, I’m getting paid today, AND I’m getting paid in 2 weeks?! I’m RICH bitchessss. I could totally afford to buy all my Christmas presents now, and still have money left over to get me that iPad I really want so I can play Angry Birds on a big screen” Don’t get caught up in the hype. It’s a dirty little psychological trick that the entire system plays to get you to spend more during Christmas, leaving you poor and part of the 99% of the population who will never get rich, while our GDP, and the corresponding salaries of our bosses and ministers which are tied to that GDP, get fatter and fatter. (I’m a big proponent of taking charge of your own wealth and not blaming or relying on any government policy to get you out of poverty. But more on that at another time)

News flash, people – that 13-month bonus that you got isn’t actually a real “bonus”, it’s part of your hard-earned, blood sweat and tears, salary. Most companies calculate your monthly wage based on a 28-day month, but of course most months have more than 28 days. When you add up all the “extra” days each month for an entire year, you get… 29 days, which is why companies are obligated to pay you that extra month’s worth of salary.  (I know this doesn’t apply to ALL companies in Singapore – some of you lucky bastards get paid a higher salary each month, without that 13-month bonus) So don’t be treating that extra cash in your bank account like money fallen from the sky, you EARNED that shizz through working all those extra days in the year!

Here’s what I do to get around that dirty little psychological trick.

1. First, I plan in advance how much I want to spend this Christmas. Say I want to spend like $1,200 in gifts and dinners and parties all that jazz. Like literally everything, including cab fares from my parties, Secret Santa gift exchanges, everything. That means I have to save $100 every month in order to afford it.

2. I then set up a savings system that automatically goes into my account every month after my salary gets paid, pulls out that $100 and deposits it into a separate short-term savings account that I absolutely do not touch until December comes around. This can be done in a variety of ways, but I use POSB’s MySavings account because it’s simple, free, and there are no charges to transferring the money when I need it. (I’ll write a bit more about automating your finances in another post)

3. When my 13-month “bonus” gets credited into my account, I take 90% of that and transfer that straight into my long-term savings account, which is meant for a future downpayment for a house, retirement, wedding, whatever. (I literally never make withdrawals from that account until I have to spend it for that long-term goal) Why 90%? Because, let’s face it – we’re all human and it’s hard as hell to resist the temptation to blow some of it on some stupid expensive item that you’ve always wanted. So I keep 10% of that and I go wild with it, guilt-free.

4. Once all that is done and December rolls around, I now have that $1,200 I saved up, and an extra 10% of my bonus (assuming your salary is $3,000 – the median salary in Singapore – that would give you an extra $300), which is ONE THOUSAND FIVE HUNDRED FRICKIN DOLLARS to make all my Christmas dreams come true.

You can now afford to go wild at Christmas without feeling guilty, with minimal sacrifice (seriously, how hard is it to save an extra $100 bucks every month?), AND you’re consciously saving up for the long term, keeping yourself in the running to make yourself rich. Now THAT’S a real Christmas dream.

Merry Christmas everyone! 🙂