Don’t let the end of year sweep your bonus away — start planning now.
The end of the year is drawing closer and South Africans are already looking forward to the holiday season and festivities. For many people, it is also bonus time and good planning will go a long way to securing you financially in 2019 and beyond.
Did you know that many people spend their bonus before it even hits their accounts at the end of the year?
Read more: 20 of the best gifts under R100
Here are 6 ways to save and ensure that you use your bonus wisely.
1. Have a plan
Once you’ve taken your expenses into account, proportion your bonus according to debt, savings and spending. The best way to do this, according to Eunice Sibiya, Head of Consumer Education at FNB, is to split your bonus based on percentages and not rand values.
“If you split your bonus by percentages it will help stop you from being reckless. Second, regardless of the bonus amount, you know you’ll be spending, for example, 40% of it on paying off or reducing debt,” says Sibiya.
2. 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 may be in the form of credit cards, store cards or personal loans. These are the most expensive, and should be paid off first as a result. If you can, consider using your whole bonus to pay off this type of debt — it may be difficult, but just think how much extra you’ll save every month if you don’t have to pay off expensive debt.
3. Consider putting money into your home loan
If you don’t have any high-interest short-term debt, put your bonus into your home loan.
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.
Read more: Getting a home loan — what you need to know
4. Set aside a portion for short-term savings
Consider expenses you will definitely be faced within 2019, such as school fees, any holidays that you have planned or home maintenance, and put money aside for those costs.
Top tip: On top of expected costs, you will also need to put away an amount towards unexpected costs.
5. 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.
Important: Hopefully you have a retirement plan of some sort, if you don’t, look at getting one in the new year.
Read more: Are you planning for retirement? Read this!
6. Have a bit of fun
Set a small portion, around 10% to 20%, 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,” says Sibiya. “But once you’ve allocated the additional money towards debt and helping secure your future self, you will see that there’s not much for frivolous spending at the end of the year.”
Example of a responsibly allocated R8 000 bonus (after tax).*
|Debt||Long or short term||40%||R3 200|
|Short Term||20%||R1 600|
|Fun||Entertainment/Holidays Spending||20%||R1 600|
*This is just a guideline — every person will be different