11 Dec What to do with your bonus?
Earning an extra or unexpected financial reward such as December bonus can be a good opportunity to get your finances in order. Whether its servicing debt, investing for future goals or getting ahead on your financial responsibilities can be achieved by spending the money wisely. Five tips for getting the most out of your bonuses.
One of the smartest ways to spend your bonus is to reduce your financial burden by paying off debt. Paying a lump-sum towards debt has two important benefits. Firstly, the entire amount is allocated towards your principal. Secondly it will reduce the total amount of interest you will pay. It is important to start with the debt that has the highest interest rate attached to it. Allocating this lump-sum payment to the debt with highest interest rate will essentially give the greatest effect from your contribution by helping pay off the most expensive debt first. Once debt is paid off you will have more discretionary money to use towards saving for future goals and all other future activities.
An important question most of us should ask ourselves is “do I have and emergence fund?” An emergency fund is always a great safety net to have in place for unforeseen events that adversely affect your life, such as shortfalls, illness and job loss. It is even more crucial to have this fund in place in the absence of illness or disability cover and income protection. It is advisable to have a minimum of 6 months salary saved in a high interest-bearing platform with full liquidity.
Contribute towards retirement savings
It is never to soon to start planning for your retirement. Remember it takes years of savings and contributions to get to a position financially where you will have enough financial capital to be able to live for the many years you still have left after retirement. In the Brand Atlas survey done in 2019, 67% of the respondents stated they had no retirement plan in place. A contribution from your bonus could be a great place to start as the base of your retirement fund.
Put some funds aside for future expenses
Paying bills for next year such as school fees, insurance, house maintenance, etc., now while you have some extra money is a great way to ease the financial pressure of that year. It is important to budget your spending and stay as close to budget as possible.
Invest in yourself
One of the best investments one can make is investing in your own personal growth. If you are in the position to better yourself, advance your career or learn new skills then an investment in yourself will give you skills and knowledge that can help you advance your career and enrich your life. Remember you are your greatest asset, so it only makes sense to set some money and time aside to invest in yourself.
However, you decide to spend your bonus it is important not to make impulse decisions and take the time to think about the best way your bonus can help you. If you need any help on deciding where the bonus funds would best help you, contact your financial advisor. Your advisor will be able to help you allocate the bonus funds into the facility that yields the highest benefit for your individual goals and needs.