It’s the home stretch, and there are only a couple of weeks left in this year. For many of us, the next few weeks represent a time to relax and shrug off the stresses and strains of a busy year that was filled with a seemingly never-ending barrage of work and family commitments.

Talking about work commitments, did you receive a 13th cheque for all the hard graft you put in this year?

While it’s not compulsory for South African employers to dig deep into pockets that are half-filled with profit, many companies still do the right thing and split up some of the pie, if the company money making needle ended up nestling in the ‘green’.

If you are one of the lucky ones who found that your salary magically doubled at the end of this year, congratulations.

The real question is what are you going to do with the extra money?

We figure you probably have 3 options:

1. Spend it

You worked hard for it, so you should be entitled to spend it, right? Nobody can argue with that. But what are you going to spend your money on?

When Black Friday rolls around every year at the end of November, it signals the start of the retail silly season, which lasts all the way until the end of the year. A recently released online statistic suggested that South Africans spend more money in this one-month period (which includes Christmas), than they do throughout the entire year.

There is no doubt that if your bank account is full of money, there is the real temptation to find a reason to spend it.

The truth is we don’t need a real reason to spend it, we often just make up a reason, don’t we?

Gadgets, clothes, high-end tech and just about anything else that is shiny and carries a label is what we end up lusting over. And if our behaviour is left unchecked, we often burn through money like we didn’t have to sacrifice hours to earn it.

If you are going to spend your 13th cheque this year, just make sure you don’t look back regretting the fact that you spent it on absolute nonsense.

2. Square off debt

You probably didn’t earn a 13th cheque large enough to square off the bond on your house, did you? But you do have enough money to square off a few of your smaller debts like retail store accounts and credit cards, right?

Don’t you think this cash injection is a perfect opportunity to settle some of your debt?

This is what you want to do:

  • List your credit agreements from the largest to the smallest, in terms of outstanding balances
  • Work out the amount of interest being charged on each credit agreement
  • Start working out a repayment plan that starts with tackling the smallest agreements that have the highest interest charges

The idea is that you want to kill off your smallest debt first, then systematically work your way through the rest of your bills.

3. Save it

If you don’t have debt to settle, you really should be saving your 13th cheque before you end up spending it. Or, at the very least, make a concerted effort to save some of it.

What are your options?

If you really don’t know what type of investment you should be in, just leave the money in your bank account, for now, or one of those savings accounts you can set up next to your cheque account. Moving the money out of your bank account is important in order to avoid the temptation to splurge.

You can always investigate investment options in the New Year.

Remember that saving and investing are to very different things.

  • You save for a holiday
  • You invest in your retirement

The fundamental difference between the two of them is the length of time.

Investing is something you need to commit to for the long-term. That means once you start, you will need to stay the course.

If you find a little quiet time in the next few weeks, try and tick these boxes. It will give you an idea of where you need to start:

  1. Do I have at least 3 x my take-home salary saved as an emergency fund?
  2. Do I want to save for anything in 2021?
  3. Is there a short-term investment goal I want to reach in the next 5-years?
  4. Is there a mid-term investment goal I want to reach in the next 10-years?
  5. When last did I review my retirement plan?

We hope that you have found this article interesting and if you’ve been fortunate enough to take home a bonus cheque, take a moment to really consider the best way to utilise it.

Until next time.

The MoneyShop Team