With all the challenges that came with 2020, the financial challenges faced by people across the globe were unprecedented.

2020 will be remembered as the year of the pandemic which shook the earth out of place, right down to its core.

Businesses of all sizes have closed down for good, the economy took a massive knock, people have lost their jobs, their homes and have had to make major changed in their lives to adapt to the impact COVID-19 has had on them.

Now, we are all left with the question: “is it possible to recover from this, and if so, how will we recover?”

Things to Spend your Bonus on

With the most expensive time of the year upon us, now is a good time to give some serious thought into how you will be managing your finances for the next few months and beyond.

If you are one of the lucky few who will still be receiving a 13^th cheque this year, it’s more important than ever for you to use your bonus wisely.

There are many things to consider when you think about that double salary landing in your bank account and we know there is always the urge to splurge – but our financial advisors encourage you to put some thought into it before you start swiping.

To help you along, we have put together some helpful tips on how to spend your bonus (and how not to).

How to Budget Bonuses

50-20-30

Although this concept is generally used as a monthly budgeting tool, it can easily be applied to the way you spend your bonus too.

Let us explain:

• 50 – Use 50% of your bonus to pay off debt
• 30 – Save or invest 30%
• 20 – Spend 20% as you wish

If you don’t have that much debt, then bump up the 30% portion and save or invest more, rather than spending more. Also, pat yourself on the back for making smart financial choices.

Should you find yourself borderline drowning in debt, consider using some of the 20% portion towards your debt and spend a little less instead.

Debt is debilitating and can prevent you from moving forward towards financial freedom. With no (bad) debt to your name, you can save more, invest more in your future and experience more!

Focus on High Interest Debt

Credit cards, student loans and clothing accounts – these commonly have the highest interest rates so, focus on paying these off first. At the very least, pay as much as you can to reduce your repayment term.

Think about these debts and how long they have taken you to pay them off and ask yourself which is more important to you: new clothes or a comfortable retirement?

Prepare for the Unexpected

If you don’t already have an emergency fund, then now is the time to start one. If you have one, then make sure you use your bonus to boost it as much as possible.

By now we know that life can deliver some serious curve balls, many of which can be quite expensive.

With an emergency fund in place, you won’t need to worry about how you will pay for your unexpected circumstance.

In addition, this means that you will have no need to tap into your savings or other long-term investments and your retirement fund will remain safe too, so no emergency can prevent you from achieving your goals.

Always remember that an emergency fund must be in an easy to access, interest earning account and is only for emergencies.

Invest Smartly

Before you invest, you must understand what your aspirations are. Ask yourself questions like:

• What is my biggest dream?
• Where would I like to be financially in 5 years’ time and what do I need to do to get there?
• How comfortable would I like to be when I retire?
• Do I have a dream destination that I would like to visit? When would I like to visit there and how long do I need to save for to make that happen?

Once you have the answers to these questions, it means that you understand what your dreams and goals are, and now you can start planning for them.

At this stage, you will need to select what sort of vehicles you need to invest in. We know that there is an overwhelming number of options available and all the financial jargon may seem a bit hard to understand, but our financial advisors are here to help you understand it all and to make sure that your money works for you in the most efficient way possible.

Live a Little

After being serious enough to make smart financial choices, make sure that you give yourself permission to have a bit of fun with your well-deserved bonus.

Life is about finding harmony in the things we do, and although being smart with your money is extremely important, it’s also important to spoil yourself a little bit – just be smart about that too!

Olemera – Financial Advisors in Johannesburg

If it’s one thing that 2020 has taught us it’s that making sure we are financially prepared for a disaster is absolutely crucial.

At the drop of a hat, the world was turned upside down and the financial impact it had on thousands of people has been incomprehensible.

Many have realized that material possessions are unimportant, and the weight of debt will hold us back from achieving our dreams and from making it out of a pandemic relatively unscathed.

A sound financial plan can help cultivate healthy spending and saving habits that will carry us far into the future with minimal stress and maximum results.

Contact our financial planners in Johannesburg to find out how we can help you achieve your biggest goals.