Blowing your bonus after a long, hard financial year may feel good, but the quick spending buzz won’t last the silly season. Simon Peile, head of investments at Sygnia Asset Management, knows some smarter ways to spend that 13th cheque.
Blowing your bonus after a long, hard financial year may feel good, but the quick spending buzz won’t last the silly season. Simon Peile, head of investments at Sygnia Asset Management, knows some smarter ways to spend that 13th cheque.
Live a little
The annual bonus was introduced as a way to help employees celebrate the year-end holidays without going into debt, by dividing their annual salary into thirteen parts and providing two months’ salary at holiday time. Peile’s all for using part of a bonus for this traditional purpose, especially after what has been a particularly turbulent year. “Spend what you need to spend. Don’t completely deny yourself at this time of year,” he advises.
Make it last
But remember that it’s a long stretch until pay day in January, so leave enough to hold you over. The best way to make sure you don’t overspend, suggests Peile, is to draw up a year-end budget – holiday splurging included – that goes all the way up to January 25th.
Escape the debt trap
If you’re really smart you’ll include paying off some expensive debt, such as unsecured loans like credit cards, into your year-end budget. It’s not the most fun way to spend your bonus, but Peile says it’s one of the smartest strategies to strengthen your financial well-being. For many South Africans, a 13th cheque is a once-a-year opportunity to break out of the credit card debt trap and start the new year with a clean slate.
Give the ultimate gift
A bonus is also your chance take big knocks at secured loans, like your home loan. Think of it as giving yourself the ultimate gift that keeps on giving as you see your home loan and payment period shrinking and shrinking. “By making additional payments, a loan that was meant to be paid back in 20 years can easily be paid back in 15 or 10 years,” explains Peile.
A word of warning, though: take a look at your loan agreement before you make extra payments, as some have clauses which penalise debtors if they pay off the loan before the scheduled period.
Invest in yourself
You’ve splurged a bit, got enough to last until the next pay day, settled some debt and you still have some left over? Time to buy yourself something special: investments. The kind of assets to buy should depend on the life stage you’re in, advises Peile, and of course on what you can afford. “The easiest – and cheapest – way to find this all out is to use a robo-advisor,” he says.
Sygnia’s RoboAdvisor is simple to use: input your information, tell it what you want to achieve and the RoboAdvisor will tell you what kind of assets you should be investing in.