Smart ways to use your December bonus responsibly during the holiday season
Most South Africans are eagerly looking forward to receiving their December salaries early while others will also get their hard-earned thirteenth cheque or bonus as well.
This is an ideal time to put that extra cash to good use and set yourself on a good financial path leading up to January.
The key question to ask during this time is how does one use that bonus for maximum efficacy.
Ester Ochse, Product Head at FNB Integrated Advice, shared five smart ways to use your December bonus responsibly when spending during the festive season, to avoid ‘Janu-worry’.
Use the 80/20 rule
First things first, 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 clearly see how much of that debt you can pay off in totality with your bonus. The trick here is to free up your monthly cashflow 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 for 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, 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 car deposit.
You can then leverage off 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.
“As one can see from these tips, receiving a windfall like 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. What’s valuable is that FNB has the tools such as the Nav»Money Smart Budgeting functionality on the FNB App to help manage, set up and track your budgets over this time,” Ochse said.
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