Putting your bonus to good use
Edmund and his wife Shirley work at a management level at a property investment firm and tech company respectively. Both of them have received a 4-month and a 2-month bonus recently, live in a self-owned property, and have capital assets worth several million dollars.
Edmund is planning to take Shirley out to a fancy dinner at a Michelin restaurant to celebrate, and use the remainder of their bonus on a new car. As they do not have children, they do not have to worry about education fees. Edmund feels it is justifiable to splurge a few thousand dollars on a nice meal and a new car, but Shirley is wondering if this is the best way to spend their extra income.
Shirley has worked at one of the Big Four accounting firms before, so taxation is the first problem she considers. As both Edmund and Shirley fall into the high-income category, their salaries plus bonuses translate into a six-figure tax to the government.
In fact, aside from a celebration dinner, a six-figure bonus should be spent wisely. Since aging brings on more illnesses, they should evaluate their current medical insurance to ensure that their medical and hospitalization plans can help them deal with unexpected expenses in times of emergencies. In addition, they can think about making long-term investments for a stream of future income. Investments do not necessarily have to be stocks – it could also be saving plans, pensions or annuities.
Getting a windfall is always exciting, but before you spend it on a treat for yourself, take some time out to think about how this money could aid in your future planning.
Special thanks to the case study provider: Financial expert: Simon Lee (Co-Director, International Business and Chinese Enterprise (IBCE) Senior Lecturer, School of Accountancy)
|Combined Assets Value:||HK$1.8 million|
|Combined Savings:||HK$1.5 million|
Make good use of a bonus or extra income: