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Wednesday, June 29, 2011

"To SPEND or NOT to SPEND..." That is the question!!!

"Ms. Jackson, I work in sales and I just found out that I will be getting a $19,000 bonus for the last sales quarter!  I feel so blessed!  I don't really have that much debt to pay off BUT I have wanted to build a backyard deck.  About a year ago I got estimates for when I was ready and able to have it built.  The lowest bid was around $10,000.  I also wanted a surround sound system since I do a great deal of entertaining at my home.  I know during this economy I should save my money but I feel that I deserve to do something special for myself since I busted my butt last quarter.  What do you suggest?  Should I use my bonus to get what I want or should I bite the bullet and save it?  -  Ready to Spend, Union City, GA"

Dear "Ready to Spend,"

CONGRATULATIONS on your healthy bonus!  You are truly blessed and are obviously great at what you do.  It is also great that your debt is not so overwhelming that you have to use your bonus to pay it down or in full.

I will NOT tell you NOT to spend you money!  If  you are a spender and I tell you that you can't spend, you will feel deprived and may rebel and possibly spend more than you want or spend it all.  For example, I don't do Diets.  When I hear DIET, I hear DIE...deprivation.  When I feel deprived (and can't have a Big Mac), I rebel.  So instead of having a Big Mac once a month, I may have one once a week just so I won't feel deprived.  Same thing with money with Spenders!

I WILL tell you to apply your Spending Plan allocations to your bonus.  At the very least, take 5% of the bonus for your play money and get what you want and put the 95% of the bonus in a high yielding interest bearing savings or CD.

OR, if you are really inclined to build that desired backyard deck, put the bonus in a high yielding interest bearing account and use the money as collateral for a Secured Loan.  This will provide you the following benefits:
  • No or Low Risk loan from a financial institution (easy or guaranteed approval & should you default on the loan, the financial institution can just take the money in the savings to pay it off ... you were going to pay cash anyway.  Just kidding.  DON'T DEFAULT!!!)
  • You may get a below market interest rate (for example, 3.00% above the savings/cd rate ... 3.00% + 0.50% = 3.50% interest rate.  Shop around.  Credit Unions have competitive Share/Savings Secured Loan Rates)
  • You'll have a positive trade reporting on your credit report to assist in improving your credit score
  • When the loan is paid in full, you still have your money with interest

Although your funds may be held up during the duration of the loan, at the end of the day, you will still have YOUR MONEY!!!

Which ever option you choose, be wise about your decision and DO NOT spend all of your cash!  Cash is leverage, especially when your credit may be "colorful" and your "credit score" may not be as SEXY as you would like it to be.

My book, Financial Fornication, discusses "Spending Plan Allocation" to help ensure all areas of your expenses have the appropriate allocation of your net income.

Again, congratulations and enjoy your new deck or new sound system and growing savings account!!!

Get my book, Financial Fornication, for more helpful hints or contact me for further assistance at

Tarra Jackson
Financial Relationship Specialist
Author of Financial Fornication: Avoid Financial & Credit Dis-Ease

* Do you have Financial Relationship questions? Submit your questions to Tarra Jackson for "Real Life Real Talk" answers to