Unlock the potential of your December bonus with smart financial choices

It’s that time of the year again. As the festive season approaches, many South Africans eagerly await the arrival of their year-end bonuses. For some, this may represent an opportunity to indulge in seasonal shopping, while others might see a chance to enhance their financial wellbeing. However, before succumbing to the festive urge to splurge at the mall, Salem Nyati, a Consumer Financial Education Specialist at Momentum Group Foundation, urges individuals to reconsider how they allocate this newfound cash.

“There are ways you can maximise a cash windfall — like a bonus — that will move you closer to your financial dreams, instead of spending it all in one go on something that won’t have any future financial benefit,” Nyati states. Here are five strategies to help you make the most of that coveted bonus.

• 1. Crush high-interest debt If you have any outstanding high-interest debts, especially credit cards with interest rates soaring between 19% to 22.5%, Nyati emphasises the importance of tackling those balances first. For example, if you have a R20,000 credit card debt at 20% interest, dedicating R10,000 of your bonus to this could save you around R3,000 to R3,500 in future interest, while also shortening your repayment period significantly. “A bonus can fast-forward your debt-free journey more than you realise, buying you financial breathing room,” she explains.
• 2. Invest for future wealth Once you’ve addressed any lingering debt, consider putting your bonus to work through investing. A one-off investment in a vehicle with a modest 10% return can significantly multiply your money over time, leveraging the power of compound interest. Nyati says that R10,000 could grow to R16,105 in five years, R25,937 in ten, and R41,772 in fifteen. “The key is starting,” she advises, as this can serve as a foundation for future goals, such as a home deposit or a holiday.
• 3. Create an emergency fund Many South Africans find it challenging to handle unexpected expenses without resorting to debt, which can create a vicious financial cycle. Establishing or bolstering an emergency fund is crucial, according to Nyati. By placing R10,000 into a high-interest savings account, you can watch it grow to R10,500 within a year and R11,576 after three years. More importantly, having this safety net ensures that you can weather unforeseen costs without falling into high-interest debt. “An emergency fund is financial self-care,” she insists.
• 4. Invest in your earning potential A less considered, yet impactful use of your bonus could be to enhance your skills or qualifications. Enrolling in a course or obtaining accreditation could open doors to promotions and higher earnings. A R10,000 investment in a worthwhile course could translate into a monthly salary increase of R1,000, effectively transforming your bonus into R12,000 annually. “Just like with money, skills compound,” Nyati says, highlighting the lifelong value of investing in oneself.
• 5. Balance enjoyment with future planning Nyati acknowledges that enjoyment is also essential, especially during the holiday season. To strike a balance between financial prudence and celebration, she suggests dividing your bonus using a 50/30/20 model. Allocate 50% towards debt repayment or investment, 30% to cover upcoming essential expenses, and reserve 20% for festive enjoyment — be it gifts, celebrations, or a weekend getaway. “You can celebrate today and set up for tomorrow — it doesn’t have to be one or the other,” she says.

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