SG Budget Babe
Asked by Anonymous
Asked 2d ago
Which is better and why?
Top Contributor (Nov)
I would prefer a high monthly pay and an average bonus. Let me share a story when I graduated over 10 years ago.
Friend of mine landed a job in a shipyard. Pay was slightly below norm, but was told that the average bonus was in the region of 9 months.
That turned out to be true for about 2 -3 years, after which the industry hit a rough patch and bonuses got cut to 2-3 months. In terms of total pay package, she suffered a significant drop of more than 25%.
There's also a psychological aspect to it. Most people, when coming into a large sum of money, will tend to spend more than they should. There are exceptions, but this requires a lot of discipline. It's easier to set a monthly budget for spending/investing/etc on a monthly salary than on a yearly bonus. A bonus, is really just that, a bonus. Something 'extra' that is not guaranteed, and might even be missing in lean years. I always advocate saving at least 50% of a bonus for rainy days or retirement, since you do need to let loose and treat yourself once in a while.
Of course if you lack discipline, then a high monthly pay can also be squandered if you are not careful, since you will be thinking that you can afford something because your salary is coming next month.
In the end for me, it's high monthly pay with average bonus, but with a good dose of common sense in spending and saving injected into the mix.
I would prefer average monthly pay with high bonus, This is because if your pay exceeds $6,000, employers dont need to pay additional employer CPF contribution exceeding $6,000. This is why many companies are willing to pay high monthly with little to no bonus.
Its cheaper for them in labour cost. and worse off to us because we get less CPF contribution
High monthly pay, my bonus can be taken from me if the company is not doing well, but you can't take away my basic pay!
High monthly pay with average bonus, because your bonus isn't guaranteed. Just look at the oil industry. Or this https://www.straitstimes.com/singapore/restraint-for-civil-servants-year-end-bonus-in-dec-amid-economic-uncertainties-public
High monthly pay - mainly because bonus could be cut any time.
This is a true story - some of my peers join a place on the promise of a high bonus, but when it came down to it, there was no bonus for reasons of company not hitting targets. It even came down to management telling employees that they should be happy to be employed, let alone think about bonus.
No matter high or low pay, one should always practice prudence when it comes to spending.
I would prefer high monthly and average bonus becos i wont get tied down to wait for the bonus. Also, nowadays some company gives bonus mid year and end year to prevent staff from leaving which im not fond of.
Higher monthly pay... Why?
bonus is variable, it can easily be cut. Dont count on the promises or history. When bad times come, it is the first to be cut.
higher monthly pay means you and your employer contribute more cpf (in general, unless your monthly is more than 6k gross, which you hit the cap). Cpf interest is still calculated monthly, so you have the interest working silently in background. Use the interest to your advantage, whether you are using cpf to pay property loan or saving for retirement.
higher monthly pay means you can keep better control over paying the bills. If you were counting on the bonus to pay for something important and when it is not paid as per what you had in mind, you could end up in a major cash crunch. Best case you dip into savings, bad worse you could be borrowing to pay loans, or selling some stuff at the worst of times and incurring a loss during the process.
its really harder to negotiate for a higher monthly pay at the next job. This would set a benchmark the hiring person could use to negotiate down your package.
Definitely a high monthly pay; 1. u don't have to wait for the bonus payout when changing jobs 2. Easier to command a higher monthly pay on ur next job (and potentially higher bonus as well)
High monthly pay with average bonus, as second is a variable component. Might also help in budgeting plans as well.
I would go for high monthly pay as it will help me to diligently invest and save instead of having an average monthly pay with high bonus. The latter will affect your thinking especially if you had wanted to switch jobs, you will have a tendency to want to wait till u got the bonus
WIll choose high Monthly pay:
Its guranteed vs bonus that is non-guaranteed and variable
Its negotiable while bonus is usually non-negotiable, subjected to employers' discretion
Its paid out monthly vs bonus thats is given at end of year (time value money)
You get paid as you work, bonus might be forfeited if you leave before bonus is announced
Higher monthly pay leads to even higher monthly pay if you change company
Only time I will choose bonus if bonus is linked to sales/profit generated and its transparent that the bonus will be proportionately greater than a higher monthly salary
Assuming both will end up with the same annual package, I would prefer "high monthly pay with average bonus". Monthly pay is a guaranteed component while bonus is not not compulsory. In the event of a recession or the company just isn't doing well, they can jolly well not give any bonus. At least with a high monthly pay, I can have a larger secured pie. Additionally, with a high monthly pay, it gives me better bargaining power when trying to get the next job!
Simply average it out and see how one compares to the other. Having said that, if you're in a cyclical industry with high bonus, then you might need to weigh the risk vs benefits as high bonus might not be always high bonus.
For myself, I prefer the former as I prefer better certainty, given that the entire package is good enough.
Top Contributor (Nov)
Simple - average monthly salary with high bonus.
This is because monthly salary is guaranteed while high bonus is non-guaranteed.
I'm more interested in the guaranteed component since this is the only way to have a concrete financial plan with it.
Anything else is extra and is always saved up. Hence, no difference to me in that sense.
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