It’s that time of the year when those who work for companies that have performed well may be fortunate enough to receive bonuses. This payment, which is usually added to your October, November or December income, could run to any amount depending on your employer’s generosity.
Many researchers consider December bonuses important because they boost employee morale and give them a financial breather during the festive season, which generally has more spending demands than the rest of the year.
Extra cash, however, may tempt you to spend money on items that may turn out to be unnecessary in the long run.
A happy-go-lucky mood may result in a high drinks bill or party favours for the family, but not much to show for all your hard work. Head of financial education at Old Mutual John Manyike advises that, just as in any other month, it’s vital to draw up a budget. Base your plan, realistically, on what you can afford.
Whether or not you’re expecting a bonus, save up for family expenses, entertainment and gifts, he advises. And before spending a cent on luxuries, fulfil all your regular monthly expenses. Only once you’ve done that, can you spend on luxuries.
Social expectations can be tricky, Manyike says. Often it can be difficult to draw the line.
“When deciding how much of your available funds to allocate to family obligations, make sure you balance your family’s expectations with what you can afford. People need to remember that there is life after December.
Don’t fall into the temptation of faking success to impress family members and old neighbours you may not even like with the money you don’t have, he adds. Rather communicate openly with your family members and specify how much you have available to help.
Take a breather
Set aside funds to unwind and recharge your batteries, especially if you’ve had a demanding year.
If you get paid early in December, you must be disciplined to ensure you have enough money to last until you next get paid at the end of January.
“Be realistic and don’t spend beyond your means. Using store accounts and credit cards to finance festive entertainment will leave you bloated with debt and can jeopardise any financial aspirations you may have for the New Year,” says Manyike.
Invest with the best
Think about making your bonus work for you.
Lima Mbeu Investment Managers chief investment officer Ndina Rabali advises investing some of your bonus or 13th cheque into a one-month fixed deposit.
A fixed deposit is a savings product from a bank that provides higher interest than a savings account, Rabali explains.
“More importantly, money cannot be withdrawn from this fixed deposit until the end of the month. This means that you have enough money to pay for ‘back-to-school’ expenses.”
Cash is king
Rabali also advises consumers to stick to cash payments.
“It is painful to watch your money getting smaller in your wallet every day. Using credit or debit cards can sometimes make you forget that you are spending money.
“Limit your trips to the malls, or if you can, stay away completely. Emotions are an important part of spending behaviour and many simply cannot resist walking past a sign that says, ‘up to 70% off’.
“This often leads to you buying things without thinking properly, and many times you end up buying items that are not necessary,” explains Rabali.