Well in the interest of disclosure I felt I should update you all on my work situation. As I previously mentioned the company had planned on doing a wage freeze which has now morphed into a full on roll back of the raises they gave at the start of Feb. So it officially got worse. The good news is they are letting us keep the money for the first two months of the year and eliminating our raises on March 1.
Of course doing this way sort of goes against behaviour finance theory. You see people develop an irrational sense of value over something once they have it (even if it was just a coffee mug) aka the endowment effect. So taking it away after the fact is a lot more painful then perhaps promising it in the first place and never giving it to them. So I entirely suspect that they isn’t particularly what management wanted to do, but in fact were ordered to do by their political masters. I tend to believe our management is fairly smart and would have avoided such a pitfall in the first place if they could.
What was particularly interesting about the situation was the fact they haven’t eliminated the bonuses from last year…yet. Which to be honest I thought that would likely get axe first (even if this is the very first year for the program). In theory this money could be paid out at the end of March. Which is really weird because if my memory is correct the bonus pool was about double the size of the raise pool. So from a cost cutting point of view it makes a lot more sense to kill the bonus. This isn’t to say I’m holding out hope for getting a bonus, but perhaps that will be the next item on the chopping block. Which is why when planning for any given year, I never believe I will get a bonus until I see the cheque deposited in my bank account. I treat it as an nice extra if I get it…I’ve never depended on a bonus in my life and I don’t plan on starting now.
The reaction around the office was an educational experience as you could almost see who had the highest debt levels by their reaction to it (based on my extremely limited sample size). Which about that time, more than ever, made my extremely happy I had decided to build a healthy financial cushion. In my case, it sort of puts a minor wrench in my plans. While I had planned to put that raise to work to put a minor boost to my savings, I do have a few other tricks up my sleeve to hit my savings target of $60,000 this year. For example, I expect to get a healthy tax refund this year, but I haven’t accounted for that in my contribution target.