Although it has been a tough year for most businesses in South Africa, some have been lucky enough to thrive and are able to gift their employees a much needed annual bonus this year.
If you are one of these employees, you might be getting excited about the extra cash injection and thinking of all the ways you can spend your money. But have you thought about what would be the smartest way to spend your bonus?
As experienced financial advisors, we have seen too many people spend their bonuses irresponsibly without thinking about how they can use that money to improve their overall financial circumstances.
With the year coming to a speedy end, we thought it would be wise to share some tips on how to spend your bonus this year. Spoiler alert – we don’t want you to spend it at all. Instead, we want you to use it in ways that will help you reach your goals.
We know you have the urge to spend your money on expensive gadgets and upgrades that you want (but don’t really need), but this is a one way ticket to no-more-money land. A good way to help yourself resist these temptations is to reflect for a moment and be honest with yourself about your wants versus needs. You may find that all items on your wish list are really just “wants” and often deep, dark holes for you to throw your money into. Think about it carefully and make the right choices. If you are struggling with this, why not speak to one of our financial advisors in Johannesburg for some expert advice?
Now that you have chosen not to spend your money recklessly, you have some extra capital to bring down your debts. Debt is your worst financial enemy and will seriously hinder your ability to move forward positively toward your financial goals. Pay off your credit card, settle your clothing accounts (and consider closing them while you are at it), and pay back your friend who generously helped you out of trouble that one time.
If you have spoken to any personal financial planner, the chances are that you have been told about the importance of an emergency fund. If you don’t have one, use some of your bonus to start one, and if you do have one, consider giving it a boost. Remember, emergency funds are there for emergencies and protect you from using your salary or personal savings to pay for big, unexpected costs.
Retirement is inevitable and the unfortunate truth is that many South Africans have no saving vehicles or investments in place that will cover their costs and pay for general living expenses after they retire. If you haven’t already set up a retirement annuity or something similar, now is a good time to start. If you do have such an investment in place, consider using some of your bonus to boost it. Another great option to think about is a tax-free savings account. Both of these vehicles offer great tax benefits, another way to save more money.
Donating some of your bonus to a registered charity comes with a number of benefits. Not only does it help people (or animals) in need, it also helps you feel good. Nothing bad can ever come from helping the less fortunate, and although your bonus is a product of a long year of hard work, donating it can be even more rewarding. Furthermore, when you donate to a registered charity, you can enjoy some tax benefits too, which we will be discussing in our next article.
The only way to achieve your goals is to take small, calculated steps towards them. Although the path may seem a bit unclear, our financial planners are here to guide you.
If you are looking for personal financial planning services, please feel free to contact us. We are more than happy to answer any burning questions you have.
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