By TKay Nthebe
As the festive season quickly approaches, employers have started paying out year-end bonuses or 13th cheques. What an exciting time for employees, especially after a tough year, however, things can quickly spiral out of control if there is no plan. In this week’s article, I want to discuss tips employees can consider when planning to spend their bonuses.
- Plan for expenses
We all have expenses that require substantial amounts of money, for example school fees and school uniform in January, car service, insurance policies or home improvements. Having extra money – a 13th cheque or bonus can ease the financial burden. My first recommendation is to have a spending plan that outlines what you want the money to buy or where the money should go. Having a clear plan will help you achieve the financial goals.
- Invest
Building wealth and having our money work for us is a financial goal to aspire to. What does this mean? This means that even if you are sleeping, your money should be generating additional or passive income for you e.g., dividends or interest income. To achieve this, you can consider using your bonus to increase your existing investments or starting a new investment such as a collective investment scheme with a registered asset manager, investing in property or buying shares of listed or unlisted companies or starting a business.
- Pay off debt
Debt is a powerful tool if used correctly, that can help you achieve your financial goals like buying your dream home or car. I also want to emphasize that NOT all debt is bad! The truth, however, is that a significant number of Basotho are highly indebted, which is a big concern. With your bonus, you can consider reducing or pay off debt on clothing accounts, credit cards or overdraft facilities to a manageable level.
- Plan for tomorrow
As an advocate of retirement planning, it should come as no surprise that I’d recommend that a portion of your bonus goes towards planning for tomorrow. The reality is many retire with insufficient capital. This, however, does not mean that you should not have fun with your money. So, with part of your bonus you can consider the following:
- Start and grow a business (or side hustle) that will provide you with income during retirement e.g., poultry, consulting, farming etc. Starting early helps you make mistakes and learn from them, while you still have time to correct them.
- Pursue a new skill or qualification that can help you generate additional income and supplement your income, especially post retirement.
- Start a voluntary fund to increase your retirement capital e.g., retirement annuity
- Increase your contribution into a retirement existing fund.
- Treat yourself & socialize
This has been an extremely difficult year, which started with lockdowns, loved ones passing away, travel restrictions and events cancelled. Though COVID-19 still haunts us, the world has gradually opened. You’ve worked very hard, so I encourage you to treat yourself and the family this festive season, while maintain all COVID-19 protocols. Plan a family trip, take pictures, and create memories. Do not forget to donate and support those less fortunate.
