Graham Craggs
3 minute read
15 Dec 2016
5:31 am

Be savvy with your bonus money

Graham Craggs

Instead of blowing your bonus on large and expensive items, rather come up with a strategy that will see you saving, investing or paying off bad debts.

With the yo-yoing rand, rising petrol prices and tough financial times, many consumers are looking forward to some respite with the promise of end-of-year bonuses. And while it’s tempting to spend the cash injection on a luxury holiday or expensive gifts for you and your family, you’ll be better off in the long run investing it or paying off debt.

We’re not suggesting that you don’t spend any of your hard-earned bonus on yourself and your family, but now’s a good opportunity to put yourself in a better financial position for 2017.

Instead of blowing your bonus on large and expensive items, rather come up with a strategy that will see you saving, investing or paying off bad debts. The small sacrifices you make and the restraint you exercise will be worth it in the long run and will set you up well for 2017, and years to come.

Budget Insurance offers the following advice for spending your bonus wisely:

  • Firstly, don’t spend your bonus or rack up credit card debt before you’re paid the bonus. Also, keep in mind that your bonus might be taxed, so don’t count on having every cent of it to spend.
  •  As soon as you get your bonus, move it from your current or cheque account to a different one. This is so you are not tempted to spend it all at once, or treat yourself to things you haven’t thought out carefully.
  • If you have any outstanding debt with high interest rates such as credit cards and personal loans, pay them off.
  •  Everyone says you should ideally have an emergency fund of three to six months’ salary set aside in case there’s an emergency, a job loss or illness. Use your bonus to set money aside or invest it in an easy-to-access fund that offers high interest.
  •  Use your bonus on house maintenance or improvement, thus increasing its value (and making for a more pleasant living setup). You can also save on payments in the long term by putting some of your bonus into your bond, which will reduce the interest on it.
  •  If you don’t own property but are planning to purchase something within the near future, you could put your bonus in an interest-bearing account toward a deposit. Estate agents and sellers are confident about an offer when a buyer has a deposit, increasing your chance of getting a bond. The larger the deposit, the smaller the risk for the bank when granting a home loan – and the more the buyer will save over the bond term.
  • Consider using your bonus toward paying school fees upfront for the following year. Some schools offer a discount for upfront payments, so there might be more of an incentive to get these payments out the way.
  •  Treat yourself! If you’re financially healthy, then buy yourself or your family something great. Remember that big gifts aren’t necessary, or even the best ones.

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