December 11, 2023
It is safe to say that this year was once again challenging for most of us. With the rising cost of living, our dollar does not stretch as far as it used to. Yet, if you are lucky enough, you might still find a little year-end bonus in December’s pay cheque. However, before you get too excited, do not forget the lesson learned from that holiday classic — National Lampoon’s Christmas Vacation — “Don’t spend it before it has been paid”! If you are not careful, we end up spending the Christmas bonus in a two-for-three and boom! December 26th arrives, and you are back in the red. This year, if you are indeed fortunate enough to get a Christmas bonus, try to be strategic about how you spend those funds. Remember, our goal is to be financially independent, and wealth creation does not happen in a vacuum. It occurs when conscious decisions are consistently made that will help you build your wealth and help create financial security.
Here are some ideas for using a bonus and extending its benefits beyond the Yuletide season.
Pay Off Your Debts: Wouldn’t it be a relief to be free from debt or at least be able to pay off some of it before the year ends? You can do that with your bonus pay. This may be the last thing you think about, especially with all the festivities and ample avenues to spend that cash during the holiday season. But paying off your debt will set you off to a good start in the new year. The first thing you can look at is paying down any high-interest debt, such as credit cards or obligations that can keep you trapped in a permanent debt cycle. The festive season comes with plenty of seeming obligations to fulfil; however, give yourself the gift of being as close to debt-free as possible for the new year by paying down (or off) your debts to start the new year with a clean slate.
Explore Investment Opportunities: Another excellent way to increase your Christmas bonus is through investments in assets for capital appreciation and cash flow income, and when it comes to investments, there are many options available to you. That is one of the many good things about investment – opportunities exist for both beginners and seasoned investors. You can buy stocks, units in real estate funds, or bonds for capital appreciation. However, you will benefit more from these investments if you keep your money in these assets not for short-term, speculative appreciation but for long-term investment. In addition, investing is also a safe way to protect your funds against inflation. Another way to use your bonus is by investing in assets that pay regular cash flows. Instead of keeping your money in a regular savings account that pays you less than 1 per cent a year, you can invest in reputable companies that pay high and regular dividends or funds that also pay dividends.
Replenish Your Emergency Fund: Having an emergency fund provides you with a financial cushion because the funds you put aside can be used for personal financial emergencies such as hospitalisation, short-term living expenses if there is unexpected job loss, urgent car repairs, or any major event that requires a sudden cash outflow. If you do not have an emergency fund or it is insufficient to cover at least six months of your monthly living expenses, you can allocate a portion (or all) of your Christmas bonus to replenish or start this fund. Ideally, an emergency fund should be at least six months of your monthly living expenses; however, you can start to build at least three months’ worth of expenses first. You can also invest your emergency fund in short-term, interest-bearing money market funds. In this way, you do not waste the opportunity to earn extra interest income, while your money is easily accessed should the need arise.
Invest In Yourself: Keep in mind that your most important asset is you. It will not hurt if you use a portion of your Christmas bonus to invest in your professional or personal growth. Look for courses, certifications, or seminars that can help enhance your knowledge and skills. Enhancing your skill set will reflect on you as a person and can open the door to better career opportunities and a higher income. This is what is called upskilling, and doing this can create a broader range of possibilities for you to build wealth. If your budget does not extend as far as a training course or programme, buy, and read books that can refresh and improve your knowledge. Apply the knowledge gained to improve your competencies and this can help you begin your journey to better – a better job, a better career, or a new business opportunity.
It is easy to view your Christmas bonus as that little extra money that we think we deserve after a hard year of work, and nothing is wrong with this thinking, but the reality is, a Christmas bonus can be so much more. It can also be an opportunity to pay down debt, top up on your emergency fund, and invest in you. Your year-end bonus can vanish in the blink of an eye if you are not wise, so to paraphrase Celine Dion, think twice before it walks out of your life. Therefore, before your bonus hits your bank account this year, think carefully about how you want to use it. Regardless of the size of your hard-earned bonus, you should assess how it can best serve you and your goals, prioritise things that will improve your future, reduce your stress levels, and bring you closer to realising true financial well-being.
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