How not to blow your Christmas bonus

Some people eagerly wait for this time of the year because it means extra money in their pocket because of the annual bonus.

And, if you’re one of the lucky few to get a bonus, you’re probably dreaming of that exotic holiday or those new golf clubs.

“We’re not suggesting that you don’t spend any of your hard-earned bonus on yourself and your family, but now’s a good opportunity to put yourself in a better financial position for 2017,” says Graham Craggs from Budget Insurance.

Craggs suggests instead of blowing it all on large, expensive buys, why not come up with a strategy that includes saving, investing or paying off debt.

“The small sacrifices you make and the restraint you exercise will be worth it in the long run, and will set up well for 2017, and years to come,” he adds.

Cheerful young woman wearing Santa’s hat is buying Christmas presents online.

Craggs has the following advice for spending your bonus wisely:

Don’t anticipate

Firstly, don’t spend your anticipated bonus or rack up credit card debt before you’re paid the bonus. Also, keep in mind that your bonus might be taxed, so don’t count on having every cent of your bonus to spend.

Out of sight, out of mind

As soon as you get your bonus, move it from your current or cheque account to a different account so that it’s out of sight, and so that you’re not tempted to spend it all at once.

Pay off debt

If you have any outstanding debt with high interest rates such as credit cards and personal loans, pay them off.

Earn interest

You should ideally have an emergency fund of three to six month’s salary set aside in case there’s a job loss or illness. Use your bonus to set money aside or invest it in an easy-to-access fund that offers high interest.

Home improvement

Use your bonus on house maintenance or improvement, thus increasing its value (and making for a more pleasant living setup). You can also save on payments in the long term by putting some of your bonus into your bond, which will reduce the interest on it.

Dream big

If you don’t own property but are planning to purchase something within the near future, you could put your bonus in an interest-bearing account towards a deposit.

Estate agents and sellers are more confident about an offer when the prospective buyer has a deposit, which increases their chance of getting a bond. The larger the deposit, the smaller the risk for the bank when granting a home loan, and the more the buyer will save over the bond term.

Discount, discount

Consider using your bonus towards paying school fees upfront for the following year. Some schools offer a discount for upfront payments, so there might be more of an incentive to get these payments out of the way.

It’s the thought that counts

Treat yourself! If you’re financially healthy, then buy yourself or your family something great. Remember that big gifts aren’t necessary, or even the best ones.

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