Reply to How to budget when your income is all bonus?

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[quote=Anonymous]So, first, if salary is $350k and bonus $650k, that is nowhere near 80+% of total comp (it’s 65%).

That’s a high bonus %, but probably not incredibly high. I’m guessing tech sales.

For us, my salary is $220k and this year’s bonus was $250k. DH is a fed with $200k salary but no bonus.

One strategy is to live on salary and save the bonus.

Another is to invest the bonus, and then either supplement salary during the year with passive income from that investment (like dividends that are spent rather than reinvested), or sell some of the investment during the year. We have done this in some past years. I prefer the dividend strategy because the principal isn’t being touched, but the growth stock strategy can work too.

Finally, you have a hybrid strategy where you live on salary throughout the year, but invest the bonus, and then sell investments only for large purchases (vacations, cars, home renovations, tuition). This is what we do now (but we cash flow vacations).

We have 3 kids, a nanny, and like to vacation internationally (so plenty of expenses).  Fortunately, on top of the HHI above we get good profit sharing, 401k matches, and a FERS pension. Total NW at 43 is about $2M in retirement, $1M in taxable accounts, and $500k home equity.  But our general annual spending is within 20% of your salary alone. [/quote]

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