Why do some households manage their finances effectively while other people wonder where their money went long before their next pay check? The answer to this is three-fold: it’s important to have enough income to support a household, but it’s just as important to have the right mind-set and skills.
Many South Africans are eagerly awaiting their year-end bonuses. While the thought of having extra money to spend over the holiday season is often a welcome one. It’s important to bear in mind that the wait until January’s pay cheque is often longer, and has the potential to be financially fraught should you spend too recklessly.
Individuals can sometimes forget about the bigger picture when receiving their bonus, or even a ‘thirteenth cheque’, in addition to their standard salary. While this is exciting for anyone who has been working tirelessly all year, a bonus can go a lot further than one may think. It can be utilised constructively beyond the festive season if the correct approach is taken.
The following advice will ensure that your year-end bonus is fully maximised:
Planning is crucial
When you’re made aware that you will be receiving a bonus it is important to draw up a plan of how it will be used before spending it with no direction. Having a plan will allow you to map out exactly where the money will go to – whether towards activities, Christmas gifts, holiday trips or preservation.
Budgeting provides perspective
Not only will this allow you to allocate where your extra spend will go. But you will also be able to keep track of your spending activity, making sure that you don’t spend out of hand. Bear in mind that this will be the last salary you receive from your employer until the end of January – so it may be a good idea to allocate some budget to cover expenses until that period comes to an end.
Your bonus can aid your debt
Most working individuals have some form of debt, and since a December salary can typically double your usual monthly salary, paying off some of the debt you have accumulated can be a great way to alleviate financial stress ahead of the New Year. This does not have to account for your entire bonus, even just a portion can be used to pay off some – if not all – of your debt.
Investing in the bigger picture
If you’re not going away over the holiday period, and do not have debt that you feel needs to be paid off, an excellent way to utilise your year-end bonus is to invest in the long term. Whether it be investing in your children’s education fund, topping up your own retirement fund or acquiring some healthy blue-chip shares. There is a real peace of mind when your future is a little more secured.