For those of you lucky enough it’s that time of year to receive your bonus. You may be tempted to spend it on something fun, but this isn’t the smartest way to handle your bonus.
Bonuses aren’t guaranteed and cannot be factored into your annual budget. Becoming too reliant on a bonus can negatively impact your financial well-being down the line.
With spare funds available, aim to use at least 30% of these funds to settle any outstanding bills and to repay your debt. The debts that are subject to the highest rates of interest are to be settled first.
You may not see the immediate advantages of paying off your debt, like a store card. But as the New Year rolls in you will have additional funds available as you will no longer be paying off this debt with interest monthly. Make sure that once your retail account has been settled that you close it to prevent you from running up the debt again.
Who doesn’t want to benefit from an upfront payment discount? Consider using your bonus towards paying school fees upfront for the following year. The saved funds can be used towards school uniforms, stationery, etc.
Only once your high-interest debt has been cleared, and you have surplus funds available you must look at your various investment options to save at least 40% of your bonus. A first step is to open a short-term savings account. The interest earned will be minimal, but easy access to the money will help cover any unforeseen or emergency expenses.
In addition to a savings account you can open a stokvel account. Stokvel is a group of people who each put in a certain amount of money into a central fund. They all agree on an amount and how often this money is paid into the fund. The money is then paid out at allotted dates to different members. All members of a stokvel benefit because the higher the account balance, the higher the interest earned.
Next, look at what funds you have left and treat yourself. You have worked hard for your money and deserve to spoil yourself. Whether it be a trip to the spa or a holiday, the choice is yours.
Sacrificing the impulse spending of your bonus will help you along your path towards financial stability.