IT IS important to use your bonus wisely under current economic conditions.
In just less than a month people will receive bonuses and other cash incentives from their employers, and the temptation to spend the money on parties and lavish goods will sneak in.
South Africa has one of the weakest savings cultures, with even middle-income earners living beyond their means.
Amos Hadebe, stakeholder relationship manager at Old Mutual, says many people who get some extra cash each December find themselves worse off financially in the new year.
Hadebe says this leads people to take out personal loans, even though they got a bonus.
"Remember that when you buy things on credit it usually means that you will be paying them off with high interest," Hadebe warns.
He gives the simple guidelines on how to have money at the end of next January:
- Work out which of your debt is most expensive in terms of the interest charged. These are usually store cards and possibly other loans.
- Work out which savings vehicle is most suitable for you, based on how long you plan to remain invested. A unit trust fund may be ideal for a short-term period of one to five years and an endowment may be a better option for a five- to 10-year plan.
- Prepare for the new year by having a good look at your income and expenses over time, using a budget and keep working on reducing the amounts spent on credit.
- If you are fortunate enough to get a 13th cheque, make it count by putting some of it into your savings plan. You need not save the entire amount - any lump sum is sufficient as an emergency fund will go a long way to your financial security.
- The festive season is a time for treats and extra entertainment. Set some money aside from your bonus for festive season activities. Set a limit and don't exceed it.
- Also consider depositing some money into your retirement annuity as part of your long-term financial goal.
- Consider setting some of your bonus aside for a well-deserved holiday. The "holiday now, pay later" concept can take months, sometimes years, to pay off.
Ways to make your bonus count
IT IS important to use your bonus wisely under current economic conditions.
In just less than a month people will receive bonuses and other cash incentives from their employers, and the temptation to spend the money on parties and lavish goods will sneak in.
South Africa has one of the weakest savings cultures, with even middle-income earners living beyond their means.
Amos Hadebe, stakeholder relationship manager at Old Mutual, says many people who get some extra cash each December find themselves worse off financially in the new year.
Hadebe says this leads people to take out personal loans, even though they got a bonus.
"Remember that when you buy things on credit it usually means that you will be paying them off with high interest," Hadebe warns.
He gives the simple guidelines on how to have money at the end of next January:
- Work out which of your debt is most expensive in terms of the interest charged. These are usually store cards and possibly other loans.
- Work out which savings vehicle is most suitable for you, based on how long you plan to remain invested. A unit trust fund may be ideal for a short-term period of one to five years and an endowment may be a better option for a five- to 10-year plan.
- Prepare for the new year by having a good look at your income and expenses over time, using a budget and keep working on reducing the amounts spent on credit.
- If you are fortunate enough to get a 13th cheque, make it count by putting some of it into your savings plan. You need not save the entire amount - any lump sum is sufficient as an emergency fund will go a long way to your financial security.
- The festive season is a time for treats and extra entertainment. Set some money aside from your bonus for festive season activities. Set a limit and don't exceed it.
- Also consider depositing some money into your retirement annuity as part of your long-term financial goal.
- Consider setting some of your bonus aside for a well-deserved holiday. The "holiday now, pay later" concept can take months, sometimes years, to pay off.
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