What professional accountants wish you'd do with your year-end bonus
As the year-end approaches, many employees are already mentally spending their bonuses or 13th cheques. While there's no denying a bit of spoiling is probably justified at the end of another gruelling year, the South African Institute of Accountants (SAIPA) offers some guidelines for spending bonuses wisely.
"The first thing to remember is that January's payday is a long time off, especially as most companies pay employees early in December," notes Faith Ngwenya, Technical and Standards Executive at SAIPA. "As always when it comes any financial matters, be they personal or corporate, make a budget and stick to it. Otherwise you risk overspending in December and getting into a spiral of debt before January's payday comes round. That's particularly true if you use a credit card - use it by all means, but only spend within your budget limits."
Ngwenya says that it would make good long-term financial sense to put aside a hefty proportion of one's bonus into an investment, and then use the balance for fun. South Africa's current and previous finance ministers have both frequently bemoaned the lack of a savings culture in South Africa.
"Your bonus is extra money, and there's no guarantee you'll get one next year - put some of it aside for a rainy day," she advises.
The end of the year is also a popular time for changing jobs or retiring - another situation in which people can find themselves with a sudden cash windfall when provident funds are paid out. Ngwenya strongly urges anyone in this position to ensure that funds earmarked for retirement are not applied to other purposes.
"Too many people treat a provident payout as a windfall and spend it unwisely - and then find themselves unable to fund their retirement properly. As life expectancy rises, the need to make ample provision for retirement becomes ever more important," Ngwenya says. "The safety net provided by government is only intended for the poorest of the poor, and most of us have to make our own provisions for retirement."
The same principle holds good when people are paid out on retrenchment, something that also often happens at this time of year.
Government's ongoing reform of retirement legislation is intended to make it harder for people to fritter away their retirement savings. However, these reforms are only due for implementation next year and, in any event, should never expected to be comprehensive.
"Laws can only ever act as a framework for how we behave. In the end, we have to take responsibility for our own actions, particularly when it comes to financial affairs," Ngwenya concludes.
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