It’s easy to get caught up in the silly season by overindulging and spending more than you need to…
This is particularly true if you recieve an annual bonus. Usually a substantial amount, it’s important to use your bonus in a way that makes the most of this once-off cash injection. Here are a few clever ways to ensure that you use your bonus wisely.
TIP: before you start spending your bonus, remember that sometimes a bonus can put you into a higher tax bracket, and even if it doesn’t, you’ll still be taxed on it.
SEE ALSO: How to get financially fit in 2018
1. Pay off your debt
Make a list of all your debt and pay off your most expensive debt first. This would be debt with a high interest rate.
- If possible, pay off clothing accounts and once done, close the account.
- Credit card debt is also a good place to start, as this will reduce the amount of interest you pay monthly.
2. Pay in advance to take advantage of discounts
Paying for expenses like school fees, medical aid or insurance policies in advance usually means at least a 5% discount. Not only will you save money, but you’ll also free up part of your monthly income, which can be used for emergencies.
3. Save at least 50% of your bonus
Pay yourself first by saving a large portion of your bonus. Given the current economic climate, short term and long term saving goals have become more important than ever.
Here are 4 ways you can start saving:
- Set up a tax free savings account.
- Create an emergency fund for unexpected expenses.
- Budget for January, which usually has more month than money. And with the steep increase in petrol that is set to continue, the cost of living will significantly increase.
- If you’re worried about spending your bonus on gifts, here are 7 easy ways to spend less on Christmas presents this year
4. Add it to your home loan
Adding as much money as possible to your home loan will allow you to finish paying it off early – which helps you save lots of cash. This is particularly important to do while interest rates are low. An added bonus is that some bond facilities allow you to withdraw money, which is a cheaper alternative to personal loans or credit cards, which will help out in emergencies.
To find out more about paying your home loan off early, here are some things to consider.
5. Set aside 10-20% for holiday fun
It wouldn’t be the silly season without some extra money for holiday fun. Setting aside 10-20% will mean that you have a bit extra for eating out, gifts, etc., but are still being financially savvy. Don’t fall into the trap of spending small amounts daily, as this can add up quickly.
Following these tips and sticking to a budget will help make sure that 2018 starts off on a positive note.
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