MANY will be tempted to spend their bonuses in the name of celebrating their hard work, but it’s best to be smart about it!
Graham Craggs, spokesman for Budget Insurance, told SunMoney that while enjoying your hard-earned bonus was a good thing, you can use it to secure your finances for the next year.
“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,” he said.
The small sacrifices you make and the discipline you exercise will be worth it in the long run, said Craggs.
He has advice about spending your bonus smartly.
- Firstly, don’t spend your anticipated bonus or rack up credit card debt before you’re actually paid the bonus – you might be in for a nasty surprise.
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 on expensive items you don’t actually need.
- If you have any outstanding debt with high interest rates, such as credit cards and personal loans, pay them off first.
- Everyone says that you should ideally have an emergency fund of three to six months 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 a high interest rate.
- Use your bonus on house maintenance or improvement, thus increasing its value and making your living space more pleasant.
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 in the long term.
- 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.
- 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.
