Nine clever things to do with your Christmas bonus this year…

by , 21 December 2015

It's that time of the year again.

When you wait - with joyful anticipation - for your 13th cheque!

And, while you might be pleasantly surprised by how generous your boss has been, you'll be just as shocked when the taxman swipes a lovely chunk of your bonus

How? Well, not only can he take up to 45% of your bonus if it's added to your December salary (because this could push you into a higher tax bracket) but, when you go shopping with the rest, you'll hand over a further 14% in VAT.

So, while you may be tempted to splurge this Christmas, there are better things to do with your bonus.

Here are a few ideas...

Tip #1: Top up your pension fund
 
Provided your total contributions fall within the 7.5% tax limit of your pensionable income, you’ll be able to deduct it from tax next year. This is a great way to get a little extra cash when you need it most.
 
Tip #2: Save a minimum of 50%
 
When the economy struggles, you should run your household the way you do your business – by cutting costs.
 
And that means saving at least 50% of your bonus. This will give you access to cash when you need it and reduce your need for credit.
 
Tip #3: Kick-start your investments
 
Whether you want to retire early, save for your children’s education or put aside some funds for that five star cruise, this is the time to pump up your savings or investment fund. So use your extra windfall to jump-start that investment portfolio you’ve been dreaming of.
 
Tip #4: Prioritise your debt
 
Over time, the cumulative effect of overdue balances can seriously erode your dreams of financial freedom, so be responsible and clear your debts this year. No one wants to start a new year by paying off the “sins” of the previous one.
 
If your bonus doesn’t cover the full amount, start with the debt you’re charged the highest interest rate on. Credit cards, for example, charge you around 18% per year – so consider starting there.
 
Four more wise ways to spend your bonus…
 
Tip #6: Buy a new set of tyres – This will save you on fuel and the maintenance of your car.
 
Tip #7: Pay your child’s annual school fees in advance – You’ll generally only end up paying for 10 months and not 12.
 
Tip #8: Pay your hospital plan or insurance policy upfront for a year – This will increase your monthly net income and you’ll be able to claim a percentage back on your tax return.
 
Tip #9: Spend 10% on anything you please – After all, you’ve worked hard this year and deserve a bit of fun!
 
The point is, if you want to make a real difference to your financial situation, make the right moves with your money. Don’t blow it all and have nothing to look back on next year…
 
Spend your money wisely and you’ll start off 2016 on a better footing. 

Let’s build your wealth together,
 
Aiden Sookdin
Editorial Director,
MoneyClub.co.za

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