The festive season is just around the corner, and for many people it’s also bonus time. A good financial plan will go a long way to secure you financially next year and beyond.
Head of consumer education at FNB, Eunice Sibiya, says if you have started looking forward to the end of the year, it’s time to consider what you will be doing with your bonus before it is swept away by the holidays.
“While it may seem early, South Africans need to spend as much time planning for their end of year bonuses as they do on holidays and travel,” says Eunice.
During this time most people spend their bonus before it even hits their accounts at the end of the year. We therefore give your tips to ensure you don’t spend the money impulsively.
1. Have a plan
You need to sit down and create a plan for your bonus before receiving it. This means looking practically your responsibilities, expenses you expect in 2016 as well as where this money can work the hardest for you. Once you have taken this into account, you will proportion your bonus according to debt, savings and spending. According to Eunice, the best way to do this is to split your bonus into percentages and not rand value.
2. Pay your short-term debt
A sizable portion of your bonus needs to go towards paying short-term debts that you may have – be it credit cards, store cards or personal loans.
Eunice says these debts are usually the most expensive, so if you are able to bring them down or succeed in paying off one, your 2016 will be much brighter.
3. Consider putting money into your home loan
If you don’t have high short-term debt, another place you can look at utilising your bonus in is your home loan account. “Reducing the outstanding balance on your home loan will reduce the interest charged. This will be of benefit to you as you will pay off your loan sooner or have access to more funds in future if you need them,” she says.
4. Set aside a portion to short-term savings
Eunice encourages that you consider expenses you will face in 2016 such as school fees, holidays or home maintenance. “Putting away a portion of your salary to costs that you know you will face in 2016 will provide a huge relief when payment is suddenly due,” she says.
5. Look after your future self
“Hopefully, you have a retirement plan of some sort; if you not, look at getting on it in 2016. In the meantime, a part of your bonus earned now will be able to help you in your senior years,” she advises.
6. Have a bit of fun
Set a small portion aside, around 10–20%, to spend over the holidays.
“It is unreasonable to expect that you won’t spend some of your bonus money on having fun with friends and family. Once you have allocated the additional money towards debt and helping secure your future self, you will see that there is not much to spend frivolously at the end of the year,” she concludes.
