4 Smart Things to do With Your Year-end Bonus
5 December 2017
Getting your bonus at the end of the year is, for many people, a validation of the good work they’ve done over the course of the year. Regardless of what your perspective is on what you receive (too little; didn’t expect to get so much), the additional cash can either be used well, or it can disappear in a flash.
Instead of spending it all on an insane weekend bender, here’s what you should consider doing to make sure all that bonus cash goes the extra mile
1. Paying off your high-interest debts
Not all of us are fortunate enough to have sponsorships from our parents. And if you happen to have some study loans, or even just credit card debt that needs to be cleared, make sure you pay them up first before you do anything. While study loans have early prepayment penalties, debts like credit card bills when not paid fully will only incur additional interest, and this can escalate much faster than you realise.
For older folks who have other financial responsibilities, clearing unsecured debt like your credit card debt is of paramount importance. The more you saddle yourself with these burdens, the harder it becomes to pay them off as you take on more financial obligations. Worse still, it could even impact your ability to take on other more important loans like a home loan.
It’s important to note that not all debt is bad, with some loans helping you to manage your money better. If you are currently servicing loans like your home loan, it definitely makes sense to make better use of your money by investing it rather than paying off the entire loan at one shot!
2. Investing in yourself
No, we’re not talking about plastic surgery, we’re not even talking about that $3,000 package that spa/gym is trying to sell you. We’re talking about taking up skill based courses that will help you improve or upgrade your skills. Because given today’s economy and how so many industries have been disrupted by technological advancement, it definitely doesn’t hurt to build up a holistic skillset.
Coding and UX design courses are getting popular due to the increased demand of such skillsets. However, if these aren’t your cup of tea, you can even try something you like for a change. Courses such as cooking, language classes, or even just how to communicate better can also be useful in teaching you skills outside the office that could be applicable at work. You’ll never know what other soft skill you might uncover or what you might learn about yourself in the process of learning something new, such as learning how to manage resources and time through cooking, or even just being more comfortable speaking to your coworkers.
The best part of all is that now with SkillsFuture credits, you can attend these courses at a heavily subsidised rate. Singaporeans aged 25 and above are entitled to $500 worth of credits, and you can use these credits for educational and training-related courses that are Government-supported. You can check out the full list of courses here.
3. Building an emergency fund
An essential step to managing your money wisely is ensuring you have a minimum of at least 4 to 6 months worth of your living expenses set aside for future emergencies.
So if you haven’t done so yet, you could use your bonus to make up the remainder. At the end of the day, you’ll never know when you might need a job-change, or even just money to tide you through an unexpected event that might incur significant costs.
Of course, you’d want to have a high-interest savings account to put your emergency funds in, so your money wouldn’t devalue as fast as being parked indefinitely in a bank account. At present, OCBC’s 360 account, BOC’s Smart Saver, and DBS’s newest Multiplier account have some of the best rates.
4. Protecting/growing your money
If your emergency fund is already fully built, you’ll want to spend a few days doing some intensive research on good investment choices. Simply saving your money is not enough. After factoring the above, you’ll want to deploy any remaining bonus to investments so you can grow your money to beat Singapore’s average inflation rate (2% to 3%). If you’re not someone who has time to watch the market (few of us do), consider starting small with a good Regular Savings Plan where you can invest as little as $100 a month. It might not offer as high returns as other investment instruments, but it allows for passive investment and is a good start for beginners new to the investment world.
With so many massive year-end sales going on, it can be really tempting to go wild and spend your bonus rewarding yourself. While there’s nothing wrong with a little reward for a hard year’s work, do bear in mind that what you are doing with the above-mentioned points is also making sure you set yourself up for success in the longer term.
What are some other smart ways people could spend their bonuses? Let us know! We’d love to hear from you.