Don't let the festive season swallow your bonus

By Staff Writer
“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,” says Eunice Sibiya, head of consumer education at First National Bank (FNB).

With only two months away from the end of the year, people are in the midst of making holiday plans. And for some this means spending their bonus money before it has even entered their account.

Making the most of your bonus
Below are some tips to help you structure your bonus spending to ensure your financially security beyond this festive season:

-Have a plan – “Sit down this month and create a plan for your bonus,” said Sibiya.  This means looking practically at what your responsibilities are, your expectant expenses, as well as determining where to put your money in order to see optimum results.

This will enable you to smartly section your bonus according to your debt, spending and saving habits.

“The best way to do this would be to split your bonus as percentages and not rand values.

 “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% of it towards paying off or reducing debt,” noted 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,” revealed Sibiya.

She goes on to explain that this debt can be in the form of store cards, personal loans and credit cards and that it is seen as the most expensive kind. She therefore motivated that you look at paying one of these cards off altogether to put yourself in a better financial position for 2016.

-Consider putting money into your home loan – In the case of you not having run up high short term debt, Sibiya suggested pushing your bonus into your home loan account.

She continued, highlighting that the reduction of your loan would in turn reduce your interest.

“This has two benefits - paying off your loan sooner, or having access to funds in the future if you need them,” said Sibiya. 

-Set aside a portion to short-term savings – It is vital you consider and make provision for definite expenses coming up as you enter the New Year, as planning is key in a balanced financial life.

“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,” pointed out Sibiya.

In addition to this you will also have to set aside capital for those unexpected expenses too.

“It is important to have a bit of money to help you through those [unexpected expenses]. This will help reduce dependency on loans,” warned Sibiya.

-Look after your future self – Sibiya went on to stress the importance of making provision for your future. I.e. putting money into your retirement fund.

As important as providing for your current financial wellbeing is, it is even more vital to plan for the future when you are void of a stable income.

-Have a bit of fun – You have worked hard the entire year, Sibiya recommended setting aside between ten and 20 percent of your bonus to spend whichever way you please.

“It is unreasonable to expect that you won’t spend some of your bonus money on having fun with friends and family,” said Sibiya. “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.”

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