It’s that time of the year again when more fortunate workers will be rewarded with a bonus payment for their diligence.
This cash couldn’t come at a better time, as the festive season is one of the most financially-taxing time periods. However, caution is needed to ensure that you don’t blow your bonus unnecessarily.
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We spoke to Eunice Sibiya, head of consumer education at First National Bank (FNB,) to give you tips that will help you structure your bonus spending, to ensure your financial security beyond this festive season.
Have a plan. “Sit down and create a plan for your bonus,” says Sibiya. This means looking practically at your responsibilities and the expenses you are expecting, in addition to determining where to put your money in order to see optimum results.
Divide your bonus according to your debt, spending, and saving habits, Sibiya recommends.
“The best way to do this would be to split your bonus into percentages, rather than rand values.
“Firstly, this will stop you from being reckless. Secondly, regardless of the bonus amount, you know that you will spend, for example, 40% of it to reduce your debt,” Sibiya says.
Pay short-term debt. “A sizable portion of your bonus needs to go towards paying any short-term debt that you may have,” says 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 usually the most expensive kind.
Try to pay one of these cards off altogether, Sibiya recommends, to put yourself in a better financial position next year.
Consider putting money into your home loan. If you haven’t run up much short-term debt, Sibiya suggests pushing your bonus into your home loan account. The reduction of your loan will in turn reduce the interest you will pay.
“This has two benefits - paying off your loan sooner, and having access to funds in the future if you need them.”
Allocate a portion to short-term savings. It’s vital that you make provision for known expenses as you enter the New Year. Sibiya point out that putting away a portion of your salary to cover these costs will be a huge relief when payment is due.
In addition, she recommends you set aside capital for unexpected expenses. “This will help reduce your dependency on loans,” Sibiya says.
Look after your future self. Sibiya stresses the importance of making provision for your future, i.e., putting money into your retirement savings.
As important as it is to provide for your current financial wellbeing, it’s even more vital to plan for the future, when you may be devoid of a stable income.
Have a bit of fun. Having worked hard the entire year, Sibiya says, it’s worth setting aside between 10 and 20% of your bonus to spend in whichever way you please.
“It is unreasonable to expect that you won’t spend some of your bonus on having fun with friends and family,” says Sibiya.
“However, once you have allocated money towards your debt and helping secure your future self, you may well see that there is not much to spend frivolously at the end of the year.”