Itâ??s school holidays, we often take leave to spend time with our families, many of us go away and some can look forward to a little extra bonus in our bank accounts.

John Manyike, head of financial education at Old Mutual, says that itâ??s a time of year when the imagination gets creative and we think about all the wonderful things we can buy with our bonus. This throws our usually sensible spending habits out of balance.

Most of us head into the festive season hoping to have a little more cash

While it may be fun to spend more than usual, it can have unintended consequences that can last for years. Two things happen to most families heading toward the festive season.

First, weâ??re targeted with a barrage of advertising and special offers, encouraging us to spend more than we usually would.

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â??Secondly, many of us become aware that the New Year will hold new expenses like school fees and uniforms. You are pulled between the urge to splurge and sensible, long-term planning.â?

Many families have grown accustomed to spending a fortune on gifts each year. But if that tradition results in your family being in debt, itâ??s time to reconsider the habit. While nobody likes to be unpopular, tempering that habit can do wonders for the familyâ??s financial health, adds Manyike.

If you do get a bonus, nowâ??s the time to do great things with it

â??Debt is the main obstacle to your financial security. Itâ??s so easy to be caught up in the spiral of debt. One of the ways of avoiding that spiral is to clear at least part of that debt with your annual bonus.â?

Think before you buy

Manyike suggests taking an hour out of your day to list priorities to check out all the pitfalls and opportunities in the coming months.

  • Tally your debt and make a conscious decision to pay off the most expensive debt first â?? high interest-bearing credit cards and shop cards.

  • Avoid getting into debt (or further into debt) by paying for your purchases with a debit card or cash, rather than a credit card.

  • Set aside a portion of your bonus for investment over the long term such as a tax-deductible retirement annuity or an endowment fund.

  • Contribute part of your bonus to reducing your home loan or car finance. Itâ??s a strategy that not only reduces the interest you pay on that loan over the years, but one that could ensure that the loan is paid up by the time you reach retirement.

  • List your unavoidable commitments in 2014: school fees, medical bills, inflation-adjusted insurance premiums â?? and aim to set aside enough to handle those expenses without financial pain.

  • Treat yourself and your family a bit. It doesnâ??t have to cost a fortune.

Stay on track

This could also be a good opportunity to chat to your financial adviser about your priorities next year, and to check whether youâ??re still on track, for example, to provide for your retirement or your childrenâ??s education.

This is especially important at a time when education inflation is much higher than the general inflation rate. In other words, the cost of a good education is rising much faster than the cost of living as well as most peopleâ??s earnings.

But if your child started school this year, that three-year degree will cost around R500 000 by the time theyâ??re old enough to go into tertiary study in 2024

54% of parents donâ??t know what the future cost of education will be

The Old Mutual Savings and Investment Monitor revealed that 54% of parents do not know what the future cost of education will be. Sinenhlanhla Nzama, marketing actuary at Old Mutual, says that three years at university currently costs around R200 000. But if your child started school this year, that three-year degree will cost around R500 000 by the time theyâ??re old enough to go into tertiary study in 2024.

Donâ??t get carried away this festive season and make sure that you kick 2014 off on a good financial footing. Speak to your financial adviser to ensure you prioritise where your extra cash goes while still enjoying some of the rewards.