With the yo-yoying rand and tough financial times, many consumers are looking forward to some respite with the promise of end-of-year bonuses.File Image: IOL

With the yo-yoying rand, fluctuating petrol prices and tough financial times, many consumers are looking forward to some respite with the promise of end-of-year bonuses. And while it’s tempting to spend the cash injection on a holiday, or expensive gifts for you and your family, you’ll be better off in the long run investing it or paying off debt.

“Instead of blowing your bonus on large and expensive items, rather come up with a strategy that will see you saving, investing or paying off bad debts. The small sacrifices you make and the restraint you exercise will be worth it in the long run, and will set up well for 2019, and years to come,” says Susan Steward from Budget Insurance.

Budget Insurance offers the following advice for spending your bonus smartly:

  • Firstly, don’t spend your anticipated bonus or rack up credit card debt before you’re paid the bonus. Also, keep in mind that your bonus might be taxed, so don’t count on having every cent of your bonus to spend.
  • As soon as you get your bonus, move it from your current or cheque account to a different account so that it’s out of sight and so that you’re not tempted to spend it all at once, or treat yourself to things that you haven’t thought out carefully.
  • If you have any outstanding debt with high interest rates such as credit cards and personal loans, pay them off.
  • Everyone says that you should ideally have an emergency fund of three to six month’s salary set aside in case there’s an emergency, or a job loss or illness. 
  • Use your bonus to set money aside or invest it in an easy-to-access fund that offers high interest.
  • Use your bonus on house maintenance or improvement, thus increasing its value (and making for a more pleasant living setup). You can also save on payments in the long term by putting some of your bonus into your bond, which will reduce the interest on it.
  • If you don’t own property but are planning to purchase something within the near future, you could put your bonus in an interest-bearing account towards a deposit. 
  • Estate agents and sellers are more confident about an offer when the prospective buyer has a deposit, which increases their chance of getting a bond. The larger the deposit, the smaller the risk for the bank when granting a home loan, and the more the buyer will save over the bond term.
  • Consider using your bonus towards paying school fees upfront for the following year. Some schools offer a discount for upfront payments, so there might be more of an incentive to get these payments out the way.
  • Treat yourself! If you’re financially healthy, then buy yourself or your family something great. Remember that big gifts aren’t necessary, or even the best ones.

“We’re not suggesting that you don’t spend any of your hard-earned bonus on yourself and your family, but now’s a good opportunity to put yourself in a better financial position for 2019,” concludes Steward. 

PERSONAL FINANCE