After a full year of working hard, you might be one of the lucky ones that get rewarded with a hefty sum of money as a bonus. It’s natural to think of all the nice things you could do with that cash: buy a handbag, pimp out your ride or go away on a luxury holiday. All these wonderful things are relevant and valid, but just imagine what it would do for your financial status if you allocated your funds to things like future plans, paying off that huge debt and adding to your savings.
Identify your priorities
Jot down your financial priorities, be it paying off big debts, investing or saving. Then identify which ones are most urgent or important. This makes it easier to see how to best allocate your funds and where your money is going while avoiding reckless spending.
Bulk up your savings
The rule of thumb is to have enough cash to cover three to six months’ worth of basic monthly expenses. When you receive your bonus, it’s the perfect opportunity to create a savings account or bulk up your existing savings account. The reality is that we don’t always know when emergencies are going to pop up, so with a back-up plan, you provide yourself with a little bit of security and comfort in the event something happens. One of the worst things you can do as far as your finances is handle emergencies with credit cards; it will prove to be more expensive in the end.
Pay off your debts
Look at your debt and structure it in the order of the most to the least destructive. In other words, identify which of your debts has the greatest negative impact on your finances and accumulates the highest interest rate in the shortest space of time and deal with that one first.
Invest in your retirement
The time to retire will eventually come and the earlier you prepare the more you can get out of your retirement plan. If you’ve had to dedicate your finances to other expenses and haven’t had the opportunity to build up your retirement fund, this is the time to start investing.
Save for future plans
Whether it’s sending your kids to varsity or finally getting that postgrad qualification you’ve been wanting, save for it. Give yourself the financial freedom to enjoy you and your family’s future plans and aspirations.
Allow yourself to live a little
Once you’ve made a few smart budgeting choices, take a moment to reward yourself for the hard work you’re doing and treat yourself. The key to a happy life is having balance, so go spoil yourself. Just be sure not to overindulge.
A year’s worth of hard work definitely deserves a reward, and an even greater reward when used wisely. So while you deserve a treat, be sure to use your bonus in a way that leaves you feeling proud and financially secure. You’ll thank yourself later!
The information in this article is for information purposes only and does not constitute professional advice.