CAPE TOWN – It is very tempting to unleash your inner Skhothane at bonus time, especially after a year of hard work.
Skhothane refers to a showmanship in which individuals or groups of individuals compete against each other in front of large crowds to determine which party is wealthier. These “battles” are performed using material items such as money, cellphones, clothes, alcohol or foods. In most instances a battle is won by the intentional destruction or wastage of one’s own expensive items to demonstrate the lack of concern for such material possessions due to the ability to afford more of the same.
However, if you waste your extra cash on flashy “nice-to-haves”, you might just be destitute come January. On the other hand, if you use your year-end bonus wisely, it can help you to take charge of your finances and start the New Year off on a strong financial footing.
This is according to John Manyike, head of financial education at Old Mutual, who says that too often people use up their entire year-end bonus during the December holiday, when it’s very tempting to spend on gifts, clothing and eating-out. “It is unfortunately also around this time that you find out that your year-end bonus doesn’t get you very far if you spend it this way.”
Manyike highlights that a year-end bonus presents an opportunity to build a more solid financial base for yourself. With this in mind, Manyike offers these six steps to getting the maximum out of your year-end bonus.
1. Spoil yourself modestly
Your bonus is your reward for working hard throughout the year, so it’s okay to spoil yourself a little, but only after you have taken care of your main monthly financial obligations. Draw up a budget and stick to it. Check out the 22seven app if you want to learn a smart way of budgeting online.
2. Pay back any personal loans
Personal loans have some of the highest interest rates around, so jump at the chance to pay them off early with your extra money. Not only will you save a lot of money on the interest that you would otherwise have to pay, but it will also ensure that you have more money in your account every month in 2019.
3. Attack your arrears this festive season and avoid entertaining yourself with plastic money
Use your bonus to kill any outstanding credit card or store card debt. This will boost your credit score. If you are not careful, you will be paying off your festive season fun well into the New Year. Try not to enjoy your December on credit.
4. Set aside a portion for all those back-to-school expenses
Allocate a portion of your year-end bonus to back-to-school expenses. Try to make the necessary annual stationery and school uniform purchases during the festive season. By doing this you will give your finances a head start for the New Year.
5. Put a little extra into your retirement savings
If you haven't reached the maximum annual tax deductible contribution limits on your retirement annuity, call your financial adviser and arrange to pay a little extra into your retirement annuity. The advantage of paying more into your retirement savings is that you can claim a portion of that back from SARS at the end of the financial year.
6. Start a savings fund or emergency fund
Whether your goal is to save for your children’s education, an emergency expense, or a deposit for a new home, now is the time to get that savings fund off to a strong start. Consult your financial adviser to explore your options and find the best way to boost your savings goals through an instrument that offers good returns.
“A year-end bonus is your reward for the hard work that you put in every month. Working a little smarter with this reward at the end of the year will ensure that it just keeps on giving,” Manyike concludes.