Dennise Williams, Staff Reporter
More Money looks at Christmas bonuses and profit shares this week. As we near the end of the year, we all look forward to the cha-ching of the extra bounce on our paycheques.
However, before you make a mad dash to MegaMart to shop 'till you drop, just hold on a minute.
Consider investing, paying off debt and generally using this year-end windfall to make 2006 a better year. As usual, the experts share their tips on how to use your bonus/profit share effectively and we have even broken down the direction to three different sums of money.
However, since it is the season of gift giving, we look at hot gifts that last. More Money focuses on treating your home (your biggest asset), your car (another important asset) and your self (your greatest asset).
Spend wisely this Christmas
TIS THE season to be jolly, and collect a fat Christmas bonus or profit share - if you are lucky. Once a standard of most Jamaican companies, the nature of the Christmas bonus has changed to a more performance-based reward.
Its no longer an automatic benefit, it now more likely to depend on the profitability of the company and the input of the individual worker during the year.
Hence, we have a more recent development in many private sector companies called the profit share, whereby employees get a piece of the profits earned. And if no profits, no profit share.
All in all, the Christmas bonus/profit share, has evolved into an incentive for workers at all levels of the company to take an interest in the bottom line of the company. That is, the idea is to consider yourself an owner and participate in the risks and rewards as such.
NOT FUN MONEY
According to the website, NewYorkLife.com, "Your bonus is not fun money. It's part of your income. That's why, as a financially savvy person, you should view your annual bonus as an opportunity to enhance your financial position, build assets and work toward achieving long-term objectives."
They continue, "Use your regular income to buy that new car, pay down debts or take a vacation. Use your bonus to make your life and your family's life more secure.
Here are just three suggestions to consider:
Shore up your life insurance protection.Life insurance protects your family. If you die prematurely, your policy will pay your beneficiaries cash in the amount you select. How much life insurance should you have? There are a number of off-the-rack formulas, such as:
(A) basing coverage on five to 10 times your income
(B) owning enough to generate X dollars in replacement income if you die
(C) basing the amount on what is known as your Human Life Value, determined by multiplying your annual income by the number of years to your projected retirement
If you have minor children, consider putting aside your bonus for their college education. Why? Two reasons. First, this is perhaps the best gift you can give your children a debt-free college degree. Second, college is expensive, and the cost keeps rising every year.
And this is especially true for many Jamaicans who educate their children overseas.
NewYorkLife.com gives this example of costs in a United States-based university.
"For example, this year (2003-2004) the total annual price tag (including tuition, fees, room and board) averages $10,636 (or more than $42,500 for four years) at public universities and $26,854 (more than $107,000 over four years) at private institutions. That does not factor in the price of graduate school or that you may have more than one child attending college."
Put a lump sum to work for your retirement. It's the same principle as saving for college, but with potentially more time to build cash. The goal is to have a comfortable retirement nest egg waiting for you when you retire."THE BOTTOM LINE
The NewYorkLife.com advisors close with, "You have a choice when you receive your year-end bonus. You can spend it; or you can put it to work for you, your family, the future."
Dennise Williams can be reached at dennise.wiliams gleanerjm.com
