Spending your bonus wisely

When December comes around and you receive your bonus (or thirteenth cheque) it is easy to splash out and spoil yourself with things you wouldn’t normally buy. However, there are smarter spending options for you when it comes to your bonus.
 
Kirsten Reynolds, marketing executive at online lender GetBucks, noted: “In tough economic times, it’s probably a good idea to rather use it towards investing in appreciating assets, pension funds or education costs instead of blowing it all on things that are short-lived or won’t grow in value.”
 
DebtBusters, South Africa’s largest debt counsellor, agreed stating that it is important to think about how you can spend your bonus in a way that will benefit you in the long run.
 
“Many consumers get caught up in the festive season spending spree and often make purchases on impulse. Before they know it, most of their money and bonuses are used to pay for unnecessary items. By using your bonus to settle debt earlier rather than later, consumers won’t be tempted to overspend,” said Wendy Monkley, head of marketing at DebtBusters.
 
What should you do with your bonus?
 
“It’s always a good idea to pay off high interest bearing debt first, such as credit cards or retail accounts. Getting rid of the negative spiral of compound debt could potentially save you a lot of money in the long-run,” suggested Reynolds.
 
Here are some tips to help you spend your end-of-year bonus more wisely:

• Save: Both DebtBusters and Reynolds agree that putting some of your bonus away into savings is a good idea, especially if you dipped into your savings during the year to help cover expenses.
• Settle accounts: If you have any accounts with small balances outstanding, DebtBusters advises settling these balances to pay off as many accounts as possible. The left over money can go towards servicing your other debts to lower the outstanding amounts.
• Improved credit record: This relates to the above point of settling your accounts. “Settling your accounts in full will also improve your credit score and this will help your financial standing immensely. An improved credit score will also improve your chances of securing more credit in the future, for example a home loan,” revealed DebtBusters.
• Discounts: DebtBusters pointed out that some credit providers may offer a discount when settling your accounts, meaning that you will pay less and save on paying interest. In addition, Reynolds noted that membership and tuition fees often come with a discount if you pay the year off in full at the beginning of the year.
• Home loan: If you are lucky enough to get a bonus, putting some of that towards paying off your home loan can make a big difference. Reynolds explained: “Just paying R10 000 off a R1 million home loan this December, will cut months off your repayment period and save you thousands in interest. Reducing your loan also helps create a buffer against interest rate hikes, and gives you room to manoeuvre should you ever need to access funds through your access bond.”
• Plan ahead: The New Year creeps up quicker than many people expect, and with it comes expenses such as stationary, school uniforms and textbooks. Buying these items in December using your bonus will help you miss the back to school rush, and may end up saving you money compared to last minute purchases that might not be planned for and end up costing more.
• Home maintenance and repairs: All properties require upkeep, setting aside some of your bonus for repairs and maintenance in the year to come can help cover the costs without damaging your household budget.