With the festive season upon us, most South Africans, fortunate enough to be employed, will receive their December salaries early, while those who are exceptionally lucky, will also get a thirteenth cheque or bonus.
While the extra cash could tempt one to splash out and treat yourself and your family, financial gurus say it is also an ideal time to put that extra cash to good use and set yourself on a good financial path leading up to January, so you don’t have to Januworry.
Ester Ochse, Product Head at FNB Integrated Advice, has shared five smart ways to use your December bonus responsibly:
Use the 80/20 rule
Allocate a portion of your money to financial wellness and another portion towards fun. The best way to do this is to take 80% of your December salary and bonus and put it towards your short or long-term financial goals and financial wellness. Then you can use the remaining 20% to spoil yourself for the hard work you put in during the year and to relax a bit.
Pay off your unsecured debt
Secondly, it is important to consider paying off expensive unsecured debt with your bonus as this is a great way of saving money in the long run. To do this effectively, you will need to make a list of all the money that you owe, the amount outstanding, and the interest accumulated over time. This will allow you to see how much of that debt you can pay off in totality with your bonus. The trick here is to free up your monthly cash flow while allocating a certain amount of money to paying off the remaining unsecured debt quicker or putting it towards an emergency fund for unforeseen circumstances in the future.
Make sure you add or start an emergency fund
With only 23% of South Africans having one week’s worth of emergency savings, according to our research, now is an opportune time to use a portion of your bonus to kick-start or add to your emergency fund through a savings account. This is an interest-bearing type of cash savings product that is easily accessible within seven days once you have given the bank notice. The idea here is for you to eventually store up between one to three months’ worth of income in an emergency savings fund but to start with smaller goals like one week and work towards the larger goal of one month. Having this available will help significantly should an unexpected expense come up, and then you won’t need to go into debt to pay for it.
Think of your longer-term financial goals
Once you have paid off your unsecured debt and set up an emergency fund, think about adding the extra money to your longer-term financial planning goals like retirement, education, a home or a car deposit. You can then leverage the benefits of capital growth and compound interest. For this, you can consider options like a Unit Trust or Exchange-Traded Funds (ETFs) as these are ideal for longer-term investment growth to help you on your wealth creation journey.
Spoil yourself, you’ve worked hard all year
Lastly, spoil yourself with a portion of your bonus, the 20% that you kept aside. You’ve worked hard all year long and gratification can come from looking at things you would not normally buy or even taking the family away for a well-deserved holiday.
A smart tip here is if you are looking to spend your money efficiently try to spend the reward points you have earned from your loyalty programme partners, as this will help to maximise your money. For instance, with FNB eBucks there is a wide variety of partners you can consider for the latest tech gadgets or appliances, even beauty, travel, and accommodation.
Ochse says receiving a bonus can really go a long way towards a great financial future without overextending yourself.
“Always bear in mind that you need to have the confidence to take control of your lifestyle and financial situation. You need to control your money, don’t let it control you.”
