Bonuses And Houseprices

[LiveinHope]

In another thread, bonuses seem to still be argued to support house prices through the deposit afforded

the proportion receiving a 5 figure bonus quoted was 2.6 million, which surprised me.

Hence the poll

Edited August 6, 2010 by LiveinHope

[Godley]

You didn't need a poll you just had to ask.

http://www.prnewswire.co.uk/cgi/news/release?id=188848

A couple of years old I grant you.

[LiveinHope]

You didn't need a poll you just had to ask.

http://www.prnewswire.co.uk/cgi/news/release?id=188848

A couple of years old I grant you.

I was more intrigued by today's levels.

No, I hadn't done any research, apologies, but the data in that report is now at least 3 years out of date and before the economy tanked

Edited August 6, 2010 by LiveinHope

[Godley]

I was more intrigued by today's levels.

No, I hadn't done any research, apologies, but the data in that report is now at least 3 years out of date and before the economy tanked

Agreed 3 years old, but not much has changed. Ignore 3 qtrs of the tripe on 'ere.

[LiveinHope]

Agreed 3 years old, but not much has changed. Ignore 3 qtrs of the tripe on 'ere.

Which 25% is the 'right stuff' ?

[LiveinHope]

Never having received a bonus, I am trying to understand the psychology of spending the bonus money.

I was always taught that if you bought something yourself with your own earned money you would value it, and look after it more.

Part of the reason that whenever I wanted a large present when I was a child, for example a bike, I was made to save and contribute some of the cost.

So, do people see bonus money as 'earned, sweated for income' or instead 'just a wad of free cash' that doesn't matter if it goes to purchase an item at an inflated price ? Would you haggle as much when spending bonus cash, or just 'plonk it down' ?

Edited August 6, 2010 by LiveinHope

[The Masked Tulip]

I think rather than bonuses the thing we all should be concerned about is people getting X tens of thousands in public sector redundancy in the coming 18 months.

Would not surprise me if plenty of people walk away with 50K plus in the next year.

[LiveinHope]

I think rather than bonuses the thing we all should be concerned about is people getting X tens of thousands in public sector redundancy in the coming 18 months.

Would not surprise me if plenty of people walk away with 50K plus in the next year.

I concur that the redundancy sums are often OTT.

However, you will be out of work after you get your redundancy payment and therefore might view how you spend it quite differently to a bonus.

[LuckyOne]

Never having received a bonus, I am trying to understand the psychology of spending the bonus money.

I was always taught that if you bought something yourself with your own earned money you would value it, and look after it more.

Part of the reason that whenever I wanted a large present when I was a child, for example a bike, I was made to save and contribute some of the cost.

So, do people see bonus money as 'earned, sweated for income' or instead 'just a wad of free cash' that doesn't matter if it goes to purchase an item at an inflated price ? Would you haggle as much when spending bonus cash, or just 'plonk it down' ?

There is an economic theory called the permanent income hypothesis that states that people will only spend (or borrow against) income that they consider to be permanent.

Over the years, many recipients of bonuses have changed their view of them from being temporary to permanent which has changed spending habits and massively increased personal financial risk.

[LiveinHope]

There is an economic theory called the permanent income hypothesis that states that people will only spend (or borrow against) income that they consider to be permanent.

Over the years, many recipients of bonuses have changed their view of them from being temporary to permanent which has changed spending habits and massively increased personal financial risk.

Thanks for the insight. Will look it up.

I was thinking about deposits for houses in particular. Would bonuses support higher house prices when mortgages are tight, simply because you had the bonus to chuck at the deposit.

i.e. you would not worry about the 'value' because you could 'afford' the house (for the time being).

Edited August 6, 2010 by LiveinHope

[LuckyOne]

Thanks for the insight. Will look it up.

I was thinking about deposits for houses in particular. Would bonuses support higher house prices when mortgages are tight, simply because you had the bonus to chuck at the deposit.

i.e. you would not worry about the 'value' because you could 'afford' the house (for the time being).

The answer to your question probably varies by person.

I see four main stages to financial freedom :

1. Positive net worth

2. Zero debt

3. Enough financial assets to live for three years without working

4. Enough financial assets to live for the rest of my life without working

By my rules, spending a lot of money on owning anything beyond basic shelter is an impediment to stage four of my plan. Most people seem to live by different rules though so I do expect that most bonuses are spent rather than saved.

[The Masked Tulip]

I concur that the redundancy sums are often OTT.

However, you will be out of work after you get your redundancy payment and therefore might view how you spend it quite differently to a bonus.

I suspect there are plenty of people for whom a 50Kish pay-off would pay off their mortgage and having their pension paid up fully would be enough for them to just 'hobble' for the next 10 or 20 years.

By 'hobble' I mean they would not need to chase a high-paying job but just one that would pay the bills.

[LiveinHope]

The answer to your question probably varies by person.

I see four main stages to financial freedom :

1. Positive net worth

2. Zero debt

3. Enough financial assets to live for three years without working

4. Enough financial assets to live for the rest of my life without working

By my rules, spending a lot of money on owning anything beyond basic shelter is an impediment to stage four of my plan. Most people seem to live by different rules though so I do expect that most bonuses are spent rather than saved.

Yep

[LiveinHope]

I suspect there are plenty of people for whom a 50Kish pay-off would pay off their mortgage and having their pension paid up fully would be enough for them to just 'hobble' for the next 10 or 20 years.

By 'hobble' I mean they would not need to chase a high-paying job but just one that would pay the bills.

Yes, that is a sensible spend, paying off debts

I doubt any would drop 50K redundancy on a deposit for a new place...but a bonus might be treated differently