Don’t let the end of year sweep your bonus away

For many people it is also bonus time and a good plan will go a long way to securing you financially in 2016 and beyond.
“While it may seem early, South Africans need to spend as much time planning for their end of year bonuses as they do on holidays and travel,” said Eunice Sibiya, head of consumer education at FNB. She added that if you have started looking forward to the end of the year, it is time to consider what you will be doing with your bonus before it is swept away by the holidays.
Many people spend their bonus before it even hits their accounts at the end of the year.
Below are six tips to help you structure allocations for the additional money.

Have a plan
“Sit down this month and create a plan for your bonus.
“This means looking practically at what your responsibilities are, what expenses you expect to have in 2016 as well as where this money can work the hardest for you.”
Once you have taken all of this into account, you will proportion your bonus according to debt, savings and spending. The best way to do this is to split your bonus as percentages and not Rand value.
“If you split your bonus by percentages it will firstly, stop you from being reckless. Secondly, regardless of the bonus amount you know that you will be spending, for example, 40 per cent of it towards paying off or reducing debt,” said Sibiya.

Pay down short term debt
“A sizable portion of your bonus needs to go towards paying down any short term debt that you may have.”
This debt can be in the form of credit cards, store cards or personal loans.
“This type of debt is the most expensive and if you are able to bring this debt down or even succeed in paying off one of the cards or accounts altogether, your 2016 will be much brighter,” said Sibiya.

Consider putting money into your home loan
If you don’t have high short term debt, another place you can look at putting your bonus is into your home loan account.
“Reducing the outstanding balance on your home loan will reduce the interest charged. This has two benefits, paying off your loan sooner, or having access to funds in the future if you need them.”

Set aside a portion to short-term savings
Consider expenses you will definitely be faced with in 2016 such as school fees, any holidays that you have planned or home maintenance.
“Putting away a portion of your salary to costs that you know you will face in 2016 will be a huge relief when payment is suddenly due,” said Sibiya.
On top of expected costs, you will also need to put away an amount towards unexpected costs.
“We are eternally optimistic when it comes to how far our money can stretch, but if you look over the last year, how many times have you been faced with an unexpected cost? A family member who needed medical help, a broken down car or appliance?
“It is important to have a bit of money to help you through those. This will help reduce dependency on loans.”

Look after your future self
You also need to look after your future self, beyond next year. This means putting away some money that you won’t touch until retirement.
“Hopefully you have a retirement plan of some sort, if you don’t, look at getting on it in 2016,” said Sibiya.
“In the meantime a part of your bonus earned now, will be able to help you in your senior years.”

Have a bit of fun
Set a small portion, around 10 to 20 per cent, of your bonus aside to spend over the holidays.
“It is unreasonable to expect that you won’t spend some of your bonus money on having fun with friends and family.
“But, once you have allocated the additional money towards debt and helping secure your future self, you will see that there is not much to spend frivolously, at the end of the year.”