We’re heading quickly towards what, for many of us, is the most expensive time of year. Year-end festivities, office parties, Christmas and New Year celebrations are followed rapidly by a new school and/or university year, increased medical aid premiums and higher living costs.
For those who are lucky enough to be getting a year end bonus or a 13th cheque, make sure to use it wisely. I don’t want to put a damper on things, but now is not the time to be spending recklessly and getting deeper into debt. Here are a few do’s and dont’s for your bonus:
Pay off your debt
The repo rate has increased six times within the last year. This has impacted already high interest rates on unsecured debt like store cards, credit cards, overdrafts etc. One of the best things you can do if you have any extra cash – is to pay off your debt.
Make a list of all your creditors and note:
- How much your outstanding balance is
- As well as how many months you still have to pay
- And most importantly, what the interest rate is of each debt that you are paying
If possible, try and pay off at least the debt with the highest interest rate, because that is the most expensive one. If you can’t do that –then try and pay your smallest debt at least. Mentally, that gives you a huge boost as you go into 2023
Set aside money for an emergency fund
If there is one thing we have learnt from Covid-19 and the subsequent lockdown – then it is the importance of having some money set aside. The two most important features of an emergency fund are:
- That the money is easily accessible
- That the money is kept in a separate account
Make school fees, university fees and associated costs a priority
Most institutions will give you a discount when you pay your fees for the year upfront. By making a large payment at the beginning of the year, you free up cash on a monthly basis. That can go towards your debt, or much needed necessities.
Put money into your home loan
The rising repo rate has hit bond repayments hard. By putting extra money into your home loan, you reduce the capital amount owed and create a buffer against future interest rate hikes.
Invest in your career development
Jobs are scarce and the job market is very competitive. Invest in extra courses, skills training and any other form of career and self-development that will give you an edge when it comes to employment.
Don’t spend your bonus before you get it
One of the worst mistakes you can make is to spend your bonus before it actually lands in your bank account. Depending on the terms of your employment contract, receiving a bonus may not be guaranteed. Wait for written confirmation from your employer on the exact amount of your bonus before taking any action. Also remember that your bonus is taxable. So take that into account before spending more than you might actually get.
Remember that Januworry is a very long month
If you get paid in the middle of December (like most people in South Africa do) then your next full salary will only be in 6 weeks time at the end of Januworry (January)
Be realistic about how much money you spend over the festive season, factor your bonus into keeping your afloat till your end of January salary.
Don’t use your bonus as a deposit for something which will see you need to make more debt, and pay more monthly instalments
The idea now is to get rid of your debt, or at the very least get it under control. Getting into a new loan with long repayment rates is not a good idea. Speak to a registered debt counsellor at EZ Debt, if you need help in getting your debt under control – or even if you just need to become more informed about your options with regards to better managing your debt.