How should I spend my Christmas bonus?

How should I spend my Christmas bonus?

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What should I do with my annual bonus? I don’t want to squander it and could use some suggestions on how to make the most of it.

There are few things quite as exciting as an unexpected windfall like a holiday bonus, a tax refund or a lotto win.

Perhaps the only thing more exciting than receiving a sum of money out of the blue is planning how to spend it.

Should you be sensible and squirrel it away for a rainy day or splash out on luxuries you’ve long been coveting, but wouldn’t have been able to afford otherwise?

A savvy blend of saving, spending and splurging will give you the pleasure of enjoying your extra money, along with the benefits of setting some of it aside. Here are ten tips to make the most of your extra cash:

Tip # 1 – Bank on a budget

Before you start spending, make sure that you have a sharp insight into your current financial status.

If you don’t have a budget, create one. Spending can be driven by emotions so a budget is a great way to curb emotional spending habits.

 

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You might even score yourself some extra spending money from your regular income just by planning your spending properly – what better bonus could there be than that?

Tip #2 – Down with debt

If your biggest expense every month is paying off debts, then save yourself some money by sinking this extra cash into paying these off. Start with the debt that is attracting the highest interest rate.

Take time to understand exactly how much you owe, and set up a plan of how you’re going to pay it all off. Consolidating your debt into a facility that attracts the lowest interest rate will save you even more money in the long run.

Tip #3 – Plan for emergencies

You’ve heard it before, but it’s so important, especially in today’s market place: have an emergency fund of three to six months’ salary stashed away as a safety net to catch you in the event of job loss or illness.

If you haven’t set this up already, use your bonus to get it going by investing it in a high-interest platform that offers easy access in the event of an emergency.

Tip # 4 – Don’t ignore insurance

Some short term insurance or medical aid providers offer discounts for upfront payments for your next year’s premiums. Find out if this is possible if it’s an option you want to consider.

Tip #5 – Settle school fees

Create some financial breathing room for yourself during the coming year, and pay school fees in advance if you have children at school. You may even save more by benefiting from early-bird discounts that some schools offer to encourage early payment.

Tip #6 – Hone in on your home and home loan

Your home is probably your single largest investment, so it’s worth using your bonus to enhance its value by spending money on maintenance or upgrades and you’ll make it a better place to live too.

Alternately, save on the costs of your home loan in the long term by investing some of your windfall into your bond, reducing your capital amount and bringing down interest charges.

Tip #7 – Lay foundations for property ownership

If you haven’t yet bought a property, put your bonus towards the deposit for your first foray into the property playground.

Banks expect deposits of between 10% and 20% of a property’s purchase price, so it’s worth building up your resources and investing them in an interest-yielding account so that you can make what will probably be the biggest, and most worthwhile, single purchase in your life.

Tip #8 – Go for grudge purchases

There are several unglamorous expenses that we all defer but they’re essential purchases that can help prevent unexpected financial trauma during the year.

For example, check your tyres and replace them if necessary. You’ll not only save on fuel, but also won’t have to dig into your regular budget when the time comes. Alternately use your bonus to pay your utility bills in advance, giving yourself some financial freedom in the new year.

Tip # 10 – Go on, live a little!

What about you? It’s also okay to use some of your extra cash to treat yourself to something that you wouldn’t otherwise be able to afford.

Don’t blow your whole bonus on this special treat though. Try to set aside approximately 10% of your after-tax bonus for this indulgence and save the rest for the more responsible stuff.

 Bonus tip: Share and share alike

Why not share your joy of receiving extra cash by setting some of it aside for a worthy charity or cause that is close to your heart?

Work it into your monthly budget to provide ongoing support throughout the coming year or find out if you can make a contribution to help meet a specific once-off need.

Steph Bester
Steph Bester is the CEO of The Unlimited, a financial services provider based in Durban that bundles insurance, financial and rewards products. Steph began his career at Nedbank before moving on to Barclays International Banking where, in the six years he was with the company, he was awarded numerous performance accolades. This was followed by a year with Lloyds TSB International before he joined the leadership team at The Unlimited in 2006.