Your end-of-year bonus: What should you do with it?

You’ve worked hard this year and there’s no doubt you deserve some recognition for it. If this recognition comes in the form of a thank you note from your boss, great; but so much the better if it’s a tidy bonus that lands with a thud in your bank account. While it might be tempting to blow your newfound fortune on lavish Christmas presents or an exotic holiday, taking a smarter approach will put you ahead of the game when the new year kicks in. Here’s how to get a bigger bang for your extra buck.

Clear your debt

Yes, it’s a pretty unsexy way to spend your bonus, but using this sudden cash injection to deal with your short-term debt is one of the smartest decisions you can make in order to have extra money in the long run. Tackle the debt that’s racking up the highest interest first and go from there. Don’t forget to look at the balances on all of your store and credit cards to make sure you don’t have any outstanding amounts owing.

Save for a rainy day

Rainy days can come without warning. You’re doing just fine when you suddenly need to replace all four tyres on your car, or your child needs to have dental treatment your medical aid won’t cover. Putting a portion of your bonus away into an emergency fund can help you cope with these nasty surprises.

Think tax-free

Tax-free savings accounts allow you to save up to R30 000 a year without paying any tax at all. If you’ve already got a tax-free account, use your bonus to push your savings to the max. If you don’t, use it to get an account going.

Boost your retirement savings

Siphoning off some of your bonus for your retirement savings is always a good idea. You’re still going to spend it, just a little further down the line (and by then, it will have accrued some interest, too).

Have some fun

We meant what we said: you deserve the recognition you get for a hard year’s work. Put between 10 and 20% of your bonus aside for yourself and the people you love. This might go towards a family day out at a theme park, a massage for you and your partner, or perhaps a deposit on that photography course you’ve been eyeing. Reward yourself, but do it modestly.

Whatever you do, don’t spend your bonus on credit before it’s actually in your account. Finding out that it isn’t as much as you thought it would be, or having it fall through entirely, could land you in some serious financial trouble. Rather, take time to plan for the ways you’re going to split, save and spend it – and always keep your future in mind.

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Choosing the right medical aid is no joke, but we’ll leave you smiling.