Receiving a bonus is a time to recognise the hard work you put in throughout the year, plus it offers you the opportunity to achieve your financial goals, according to Dhashni Naidoo, consumer education programme manager at FNB.
Naidoo said: “When we think about spending the money, we need to do so responsibly.”
The 80/20 budget method is a good way to help you understand how to spend your bonus money properly.
With this method:
∎ 80% of your bonus will be used towards achieving financial goals, such as reducing your debt or investing.
∎ 20% you can use to reward yourself with those nice to have items.
Here are some tips to help you spend your bonus responsibly:
Reduce debt
According to Naidoo, you should make extra payments towards debt and try to pay off higher interest-bearing debt first.
Farzana Botha, segment solutions manager at Sanlam Savings, said you should service your debt first when you receive a financial windfall like a bonus.
“Reducing debt helps you to save in the long run, by freeing up cash that you normally use towards debt repayments,” Naidoo said.
Saving for emergencies
You should put some of your bonus money towards starting an emergency savings or adding to your emergency savings.
You should have at least three months’ salary saved up in an emergency fund, according to Katlego Gaborone, a financial planner at Momentum.
Invest for the future
When you get your bonus money you should speak to a financial adviser about investing for the future.
Naidoo said: “Higher interest rates mean the cost of borrowing is higher. However, it also means you will earn more interest on saving and investments.
“Interest earned on positive balances means you have the opportunity to earn additional income in the form of regular interest income. If you haven’t already started on the investment journey, this is a good time to start,” he said.
“You should empower yourself with information about investing by speaking to an adviser, your bank or doing your own research.
“This way you can learn about the different types of investment vehicles, as well as look to match your investment goal with an appropriate product,” Naidoo said.
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