Boost your bonus

By admin
05 December 2013

If you’re lucky enough to be getting a year-end bonus, make sure you spend it wisely – especially if it’s your first.

It’s the end of the year. You’ve worked hard and your boss is rewarding you with an end-of-year bonus or 13th cheque. If it’s your first, you might be tempted to blow it. Even if it’s not, you might want to spoil yourself with some new clothes, furniture or a seaside holiday. Think again, and rather be money wise and pay off some of your debt or invest for the future.  Here are five tips which can help.

1. Set financial goals

Write down your short- and long-term financial goals, such as owning a home in the next five years, paying off all your debt, buying a car or saving for your children’s tertiary education. Remind yourself of your goals when you have the urge to spend.

2. Reduce your debt

Use your bonus to reduce your debt. Focus on your accounts with the highest interest rates such as credit cards (which sometimes have interest rates as high as 29 per cent) and store cards. Then reduce the amount you owe on your student loan (if you have one) or your car repayments.

3. Bring down your bond

If you own a house or flat, pay a part of your bonus into your home loan. The advantages of paying off your bond are that you’ll reduce the amount of interest you pay and, if you need cash in an emergency, you might be able to access it.

4. Boost your emergency-fund savings

Deposit part of your bonus into your savings account so you build on your emergency-fund savings. You could also open a high-interest money market account and start building up your savings so they equal three to six months of your salary – the recommended amount experts say you should try to have set aside. The money will still be easily accessible and if you have an unexpected (and expensive) crisis – such as a medical emergency – your savings will help cushion the blow.

5. Invest some of it

Invest a lump sum in a conservative unit trust or in a bank account such as a 32-day notice or fixed-deposit account. You could also buy government retail bonds from the Post Office or take out insurance company investments. Thinking long term, you could invest in a retirement annuity (RA), which has tax benefits.

Source:  Ruwaydah Lillah (Drum magazine archives)

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