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I don't know what's "best" financially speaking, but my husband's year end bonus can be anywhere from 1/3-1/2 his base salary, and it fluctuates and is never guaranteed. We completely live on our combined base salaries, and that includes maxing out 401ks and all that. We've done a variety of things with his bonus the past few years, but usually about half goes into a giant extra payment on our house, about 40% into savings/investments and then last year I convinced my husband to set aside 10% to take us and his parents on vacation.

I'm going to try to replicate that formula this year, but with a different vacation, haha.

Curious what others do!

Is there a minimum amount it could be? Is he guaranteed to get a bonus at all?

i'm a photographer and use YNAB to budget. i give myself a salary based on past yearly (as well as what i know i have booked) net income spread throughout the year. DH is a FF and has a base salary as well as a long of opportunity for OT, which is plentiful, but we don't want to necessarily rely on it in years to come. when we bought our house, it was based on his base salary as he didn't have enough years to show OT as part of it. if i were you, i would probably build my budget based on the base salary plus maybe 10% for the year and try to include as many savings goals as part of it, even if it's not the max. then if and when he gets his bonus, max out the rest of savings. i wouldn't want to get to year end and then NOT get the expected bonus and then be up a sh$t creek for our savings goals while knowing i could have cut back on expenses throughout the year to meet them.

@Meowkers: in that case I would likely keep doing what you’re doing and pretend it doesn’t exist when budgeting for the year ahead. I would rather have a windfall to figure out than budget based on an expectation and then the company has an unexpected bad year, etc. But I’m really conservative with this stuff.

@DesertDreams88: yeah, that’s true. You could just add it into your budget for the next year! @meokers:

@Meowkers: coming back to this because "year end" bonuses were announced a couple weeks ago, so we've been in the planning stages. So actually, my answer to your original question is changed because now that we're in the middle of it again, I realize I was remembering a few things wrong re: your questions about 401k and that stuff.

So, although my husband's bonus is for 2017, he gets the check in 2018, so what we do is pre-pay a lot of things in 2018. Because he gets the bonus added onto a regular paycheck, he already has some deductions set up that he doesn't change--for example, he has 10% of his paycheck set to go to 401k. So when he gets his 2017 bonus, 10% will be going to his 2018 401k contributions. That means he will max out in a couple of months and the rest of the year he won't be making contributions out of his paycheck. We also have a 529 set up, so we are setting up a big initial payment for 2018 pre-tax, so the tax rate on the rest of his paycheck that month (state taxes, ss, federal tax, etc) is lower. That means that at some point halfway through the year, he'll max out the SS payments and won't have to pay that anymore in each paycheck.

With the remainder, we split it into 4 parts--we set aside a chunk to go towards some things we need in the house--a "refresh" of some decorating items, blinds, new light fixtures, we need the whole apartment painted, etc. The 2nd part are new investment funds outside of the existing mutual funds/retirement stuff we have. Basically, we are investing in place of adding to savings, but this is money we will take back out if we decide to upgrade to another house...hopefully we'll make some money in the meantime. The 3rd part is set aside for summer programs for our kids (camps, lessons, etc), and then the 4th part is up for discussion right now. I want to blow it on a big family vacay again, my husband wants to pay for any vacations out of our regular paychecks and add the 4th part to the investments chunk. We'll see, we're negotiating that.

whew! Just wanted to come back because originally I said we *don't* pay for 401ks and stuff out of bonus money, but it turns out we actually do, it's just that we're using last years bonus to pay this year's 401k contribution, rather than not contributing in 2017 and then using the bonus at the end of 2017 to back pay 401ks, if that makes sense.