While we have extensive experience helping bp employees and alumni optimise their benefits, Emery Little operates independently and is not affiliated with or endorsed by the bp group, including BP Pension Trustees Limited, on behalf of the BP Pension Fund. This allows us to provide objective, independent guidance focused solely on your best interests.
As bonus week approaches at bp, many executives and employees will soon be making decisions about what to do with their additional income. While this year’s bonus rate is rumoured to be lower than previous years, receiving any bonus is still something to celebrate.
A bonus is a reward for good performance. You’d think there would only be positives. But at Emery Little, we often find that bp executives feel overwhelmed when deciding how to use their bonus effectively. Should you treat yourself? Save for the future? Or share your good fortune with others?
The lack of a clear plan often leads to inertia, kicking the can down the road.
We’re here to help.
The truth is, there’s no one-size-fits-all approach. The right strategy involves balancing immediate enjoyment with long-term financial wellbeing. Let’s explore the three main options: spend, save, and gift.
Spend: Enjoying the fruits of your labour
There’s nothing wrong with spending some of your bonus on yourself and your loved ones. After all, you’ve worked hard for it! However, thoughtful spending often brings more lasting satisfaction than impulse purchases.
Consider allocating funds to experiences or home improvements that will bring ongoing enjoyment:
- That kitchen renovation you’ve been putting off
- The family holiday you’ve been dreaming about
- Quality furniture that will last for years
Setting a budget for your “spend” portion helps ensure you enjoy your bonus without later regret. Many of our clients find that dedicating around 25-30% of their bonus to meaningful spending strikes a good balance.
Save: Building for tomorrow
Saving and investing your bonus can significantly impact your long-term financial security. Options to consider include:
Top up your emergency fund
We typically suggest having 6 months of essential expenses set aside. If you’re not quite there yet, your bonus provides an excellent opportunity to strengthen this buffer. If you have significant expenses planned in the next 1-3 years, keeping the money in cash ensures it’s not subject to unwelcome risks.
Invest in global equities
For longer-term goals, investing in a globally diversified portfolio of equities (the great companies of the world) can increase your chances of receiving above-inflation returns. Getting proper guidance on where and how to invest will help you start on the right track.
Reduce mortgage debt
From 2008 through to 2022, UK interest rates never rose above 2%. This made debt relatively cheap compared to previous generations. As we’re now over 2 years into being above 3%, debt doesn’t feel so cheap anymore.
Using your bonus to reduce your mortgage saves interest over time and brings you closer to outright ownership. Whilst debt is still cheap compared to the 70s, 80s and 90s, we have never met anyone who has regretted paying off their mortgage!
Gift: The joy of giving
Perhaps the most overlooked category, but often the most rewarding, is gifting some of your bonus to others. This could include:
Supporting family members
Whether it’s contributing to your children’s education, helping them onto the property ladder, or treating your parents to a special day out.
Charitable giving
Donating to causes that align with your values can bring immense satisfaction.
Lunch with friends
One approach that consistently stands out is using your bonus money to cover lunch or dinner for friends or family.
It doesn’t need to be a lot or a big fuss, just get the bill at the end and say, “Thanks, but this one is on me.” It might feel awkward, and you might need to fight back against friends insisting to split it, but treating your friends never feels anything other than great.
Finding your personal balance
The right mix of spend, save, and gift will depend on your individual circumstances and goals. For those early in their career, perhaps more emphasis on saving makes sense. If you’re financially secure with retirement well-funded, you might lean more towards spending and gifting.
What we’ve found works well for many clients is the “three-way split” approach, allocating your bonus across all three categories in proportions that feel right for you. This balanced approach allows you to enjoy today, prepare for tomorrow, and share your good fortune with others.
Whatever you decide, take time to make a conscious choice rather than letting your bonus simply disappear into your current account. A thoughtful plan ensures your hard-earned bonus enhances both your present and your future.
From all of us at Emery Little, congratulations on your bonus, you’ve earned it!
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