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The tradition of a year-end bonus is no longer a certainty, with changing work environments and global financial challenges altering the norm. For those fortunate enough to receive a 13^th cheque or bonus, it’s critical to use this windfall wisely to enhance financial stability and security.

We draw from a recent Ninety One article on eight ways you can make the most of your year-end bonus.

1. Celebrate Responsibly

Reward yourself and your loved ones within limits. A good benchmark is to spend no more than 10% of your after-tax bonus on indulgences. Most of your bonus should rather be allocated to specific financial goals.

2. Reduce Short-Term Debt

Prioritise paying off high-interest debt like personal loans and credit card balances. Eliminating this debt can significantly ease financial strain and pave the way for a better financial future.

3. Maximise Tax-Free Savings Accounts (TFSAs)

Contribute up to R36,000 annually to a TFSA. This is a tax-efficient way to save for specific goals or supplement your retirement savings. A Tax-Free Savings Account is flexible and can be invested in a range of fund options: offshore equity, SA equity, balanced funds or money market.

4. Build an Emergency Fund

Aim to save at least six months’ income in a unit trust investment account that you have immediate access to. This buffer can protect you during unexpected financial hardships, such as job loss or medical emergencies, without jeopardising long-term investments or retirement savings.

5. Build an Offshore Fund

As South Africans, it is important to diversify our savings. The most tax-efficient way to invest offshore is to buy funds or indices directly offshore in foreign currency (e.g., US Dollars). One only needs R50,000 to open an offshore platform account, or ±R400,000 to start an offshore endowment. See more on our offshore solutions here – OFFSHORE INVESTING

6. Boost Retirement Savings

Consider investing up to 27.5% of your taxable income (maximum R350,000 per year) in a low-cost retirement annuity. The resulting tax refund can be reinvested or used to reduce debt further.

7. Invest in Unit Trusts

Start investing in unit trusts. They provide cost-effective access to a wide range of local and international investment opportunities.

8. Tackle Long-Term Debt

Use remaining funds to reduce long-term obligations, like your home loan. This can relieve monthly financial pressure and reduce your liabilities.

In Conclusion

Managing finances effectively requires discipline, much like maintaining physical health. Use this year’s bonus as an opportunity to strengthen your financial position. Consulting a qualified financial planner, like one of our Client Portfolio Managers, can ensure your approach aligns with your long-term goals.

• Review or create a RETIREMENT PLAN
• View our FINANCIAL PLANNING GUIDE
• Or email info@investonline.co.za to schedule a meeting with one of our financial planners.

Start, by getting a Client Portfolio Manager to CALL YOU

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