You've earned your bonus and you're entitled to enjoy it. But if you want to get the most out of it, use it wisely.
An annual bonus provides you with an opportunity to give your finances a boost, as long as you resist going on a buying spree over the festive season.
This year make a concerted effort not to blow your bonus. Ensure your bonus puts money in your pocket for the rest of next year - and beyond - by using it in one or more of the following ways.
The windfall of great riches can, if mismanaged, make things worse, not better, for the recipients," said American author and Professor Michael Mandelbaum.
But you don't need a college degree to know that extra cash shouldn't be spent frivolously — that part is easy. The hard part is actually figuring out what exactly qualifies as a good way to use a small windfall. Here are six simple — and most importantly, smart — things to do with your bonus or commission check.
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Here are some ways to earn your bonus wisely
Pay off your Debts
If you cannot settle all your debts at once with your bonus, at least make a start at conquering your debts.
Check the interest rates that apply to your various debts and pay off the more expensive ones first. This is likely to be your credit and store cards.
Although interest rates may drop further, at some stage they will increase again. When interest rates go up, debt becomes more expensive. Many people have lost their homes or had their cars repossessed because they could not afford the repayments after an increase in interest rates.
Easy credit and festive season offers, such as discount vouchers accompanying new accounts, make it easy to overspend, so try to keep a tight reign on your spending this season, rather than face the consequences of not being able to pay your debts in the new year.
Check if you have sufficient life and health insurance cover. If you are just starting out on your career and are relying only on the employer’s group insurance, the Diwali bonus can be used to buy a term plan or a health plan. As a married individual with a family, there is a case to use the Diwali bonus towards investing in a family floater plan.
Invest in emergency fund
A Yearly bonus can be your best bet to start an emergency fund if you do not have one already. Invest in high liquidity instruments like bank fixed deposits or liquid funds to ensure you are cash ready when faced with any financial emergency.
Boost your retirement savings
Even if you contribute to an employer-sponsored retirement fund, it is unlikely that your retirement benefit from your company pension or provident fund will provide you with an adequate income until you die. If the rules of your fun
Invest in your children's' education
The cost of education - especially at private schools and universities - keeps rising.
Ideally, you should start saving for your child's education from the day he or she is born. But even if your child has started school, an investment in a five-year endowment policy could ease your burden significantly years from now.
Give the taxman his due
If you have earned additional income in the past year on which you have not yet paid tax, you need to prepare yourself for a tax bill from the South African Revenue Service.
If you don't have money to pay tax when it is called for, you may be liable for interest and penalties. To avoid this, put some or all of your bonus aside for tax.
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