File photo: African News Agency (ANA)
JOHANNESBURG - You have worked hard and earned that bonus, but now the internal dialogue between the head and the heart starts.

Should you pay down that personal loan, put it towards next year's school fees - or upgrade your holiday accommodation and double up on gifts during this festive season?

It is in fact possible to achieve all of these, at least in part. It is simply a matter of prioritising and adding in time. In this way you can both enjoy the fruits of your labour, reduce the pressure on your income in the coming months as well as create a base and departure point for actually achieving your full potential and maximum financial well-being.

The best place to start is to take your current financial position into account - where you are with what you have and what you want. Take three simple steps:

* Indulge guilt-free: Limit what you spend to the first 10percent of your bonus.

* Set your top five priorities: What do you want to do with the remaining 90percent balance of your bonus over the next 12 months?

* Choose the correct financial vehicle for your prioritised outcomes: Get professional advice to establish the correct strategy.

Establishing priorities is a good way to make the right choices:

* Priority One - Emergencies: This is the first secret to maximise financial well-being. You should have between three and six months’ salary saved in an interest-bearing structure where you can access your money within 48 hours. A basic money market fund would be a good vehicle to achieve this objective.

Putting money into debt for emergencies means you pay off debt but you then go back into debt to pay for emergencies. You thus end back where you started - no savings and debt to pay.

* Priority Two - Debt: When paying down debt the objective should be to settle it permanently. You only start to grow your wealth when you save in structures that grow your money.

Start your journey to earning interest and investment growth rather than just paying interest endlessly. If you are able to settle one debt permanently and remove it from your monthly debit orders, you set your next 12 months up to be doubly successful.

* Priority Three - Retirement: Currently 27.5 percent of taxable income can be contributed to any retirement fund and you can claim this as a tax deduction. If you have not yet exhausted this contribution rate, you can take advantage of contribution to a retirement annuity fund or your employers group retirement fund (if the rules allow) for the balance of the tax deduction. In this way you can give yourself an additional bonus during the next year.

* Priority Four - The reasons you tell yourself you can't save: People often blame life circumstances for not saving. These are exactly the reasons that you should be saving for. Generally, disposable income (after tax) would be used for this project. Ideal savings and investment vehicles for consideration therefore would be tax-free savings accounts or unit trusts.

Essentially, the trick is to start saving. Set your sights on your best life, with maximum financial well-being and go for it.

To get started and keep you on target, a professional financial adviser should be used in putting together and implementing the correct investment vehicles for your financial well-being strategy.

Ultimately, your bonus can and should be the catalyst that gets you moving towards your dreams as well as creating some short-term reward.

Mark Hawes is an Alexander Forbes financial planning consultant.

PERSONAL FINANCE