‘There are several great things you can do with a bonus that will help you feel wealthier all year round,’ says Shaun Rademeyer, CEO of BetterLife Home Loans. ‘The most important of these is to reduce your debt, especially any debt that carries a high interest rate.’
Other ways to use a bonus to improve your financial future, he says, include the following:
Use the ‘envelope strategy’ to stick to your budget for festive-season spending
Decide what you are going to spend on gifts and entertainment, and allocate an exact amount, or ‘envelope’, for each occasion or family member. Of course, it isn’t practical to go shopping with actual envelopes full of cash, but having a very detailed list will help you stay on track. You can also separate your festive-season money from the rest of your money by putting it into a special debit-card account. Then leave your credit and store cards at home.
Save for January
You can stop this from being the longest, most miserable month of the year by putting aside some of your bonus to cover extra costs. These might include school fees, medial-aid and insurance-premium increases, annual licence fees and any additional credit-card charges that you incurred over the festive season.
Open a savings account
If your budget is free of high-interest debt, use at least some of your bonus to open a rainy-day account – and set up a debit order to add to it every month. This is the account that will help you weather unexpected home and car-repair costs, medical or family emergencies, and insurance-excess payments, without derailing your household budget or racking up new credit-card debt.
Advance your home-ownership plan
If you are working towards buying your own home, boost your deposit savings with at least part of your bonus. The bigger deposit you can pay, the more likely you are to be approved for a home loan – and the smaller your monthly repayments will be.
If you are already a home owner…
…a good option is to use your bonus – or at least part of it – to reduce the capital portion of your home loan. This could benefit you all year with a lower monthly instalment. Alternatively, if you keep your instalments the same, you can pay your home off faster and potentially save several years’ worth of interest.
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