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It is silly to blow your bonus

By unknown | Nov 18, 2009 | COMMENTS [ 0 ]

THE festive season is just around the corner and millions of employees will be queuing up with hands held out in anticipation of their bonuses.

THE festive season is just around the corner and millions of employees will be queuing up with hands held out in anticipation of their bonuses.

Though a bonus is defined as an "unexpected extra", in South Africa we have become so used to this norm that it has become almost an entitlement.

Some of us will not get bonuses this year and if you do, spend it wisely.

In most cases a bonus flows out almost as soon as it lands in a bank account or in your hands.

Some pay outstanding bills while others splurge on unnecessary presents for friends, families and colleagues.

First National Bank head of investments Robert Keip warns consumers who expect to receive bonuses to think carefully before they squander them.

"We would like to advise South Africans who expect bonuses to use the money wisely. We live in uncertain economic times and this period requires people to use their money in a sensible way," he says.

He advises consumers to first pay their debts.

"Use this as an opportunity to catch up with payments," Keip says.

He says if you have additional funds you can make additional contributions to your bond.

The advantage of this is that the interest you will save on these additional payments is at the interest rate on your bond and will be tax free, he says.

Keip says consumers must learn to save.

"Most individuals should have an emergency fund in a savings account for unexpected emergencies.

"This should be two to three times your monthly salary.

" If you do not have such a fund or are not building it up, you are forced into expensive debt when unexpected expenses arise."

Levin Born of Debt Help Financial Services shares Keip's sentiments.

Born says this festive season should teach people about managing their cash flow, which can keep them out of debt and help them save. He too urges consumers to save at least 50percent of their bonuses.

"Open a savings account if you don't already have one. Invest in a savings policy, don't splurge, run your household as you would a business - cut costs," Born said.

With your bonus safely in a savings account, it gives you access to cash when you need it and reduces the need to use credit cards, he says.

Born says the majority of South Africans live at a zero balance, meaning that everything that comes in goes out. They are therefore technically bankrupt, he says.

"But, all is not doom and gloom and while you must try hard to save your bonus this year, you can still enjoy a fun and stress-free festive season," Born says.


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