This article was written in collaboration with AIA Singapore. All views expressed in this article are the independent opinion of DollarsAndSense.sg
December is fast approaching, which can only mean one thing for some people – receiving our year-end bonus!
There are dozens of things Singaporeans can choose to do with their year-end bonus. With the growing festive spirit in December, many people inevitably end up indulging in expensive gifts and overseas trips for themselves and their family members. However, there are other things a prudent Singaporean can spend on to make their bonus last over a longer period.
Here are 4 things that many Singaporeans spend their year-end bonus on, and a few prudent alternatives to consider.
#1 Go On A Holiday
As we approach the end of another year, not only do schools have holidays, there are companies that may also close for the festive period. To capitalise on this, many Singaporeans may head overseas for holidays with their loved ones, friends, colleagues or even on their own.
With an end-year bonus credited into our bank accounts, we might be tempted to spend more than we intend to on our holidays. We might opt for a more luxurious hotel, or bring more cash to spend overseas. We might even use our bonus for an additional unplanned trip.
While holidays can help to keep us refreshed and provide an opportunity to spend quality time with our loved ones, we should bear in mind to spend within our means and not overspend on our holidays.
What you can do instead: Save For Tomorrow!
Rather than increase the budget you have for your overseas trips or go for another holiday, you can opt to save your bonus for future expenses.
If you are in a stage of life where you have big-ticket expenses coming up, such as a wedding or a renovation, this extra cash from your bonus will come in handy to give you a head start to financing big-ticket items.
#2 Buy Extravagant Gifts For Our Loved Ones
During the festive season, we might want to shower our loved ones with gifts to show them our love and appreciation. With a year-end bonus in hand, we might be inclined to buy more gifts or extravagant gifts such as a new phone or even jewellery.
However, we should try and ensure that we are not spending beyond our means. For example, the newest iPhone 11 Pro Max at 512 GB costs a whopping $2,349. That’s a substantial amount for a gift which is likely to be beyond many people’s budget.
What you can do instead: Invest For The Future!
With our loved ones’ best interest at heart, we can opt to invest this money for them, with the aim that this amount will increase in the future. There are a few ways we can do so, such as investing in specific stocks and bonds. We can also use this money to buy a savings plan.
While this is not a physical gift that can be used or enjoyed immediately, the future value of this investment could become a sizeable gift for them in the future, which is likely to be worth more than anything you can buy for them today.
#3 Put A Down payment For A Big-Ticket Item
When we get a bonus, one of the things we can also do is to put a down payment for a big-ticket item. For example, we might be encouraged to buy the car that we have been eyeing for the past few months, especially since we have extra money on hand for the down payment.
What you can do instead: Pay Off Your Debts!
However, before committing to any big-ticket items, we should first take responsibility of our finances by paying off any outstanding loans to keep the interest from snowballing. A good example could be to pay off all your outstanding credit card bills. Credit cards charge high interest rates that could snowball rapidly when left to accumulate.
For those with outstanding student loans, this could be a good time to pay off your loan and start off the new year free of debt. You can also use this bonus to pay for insurance premiums.
#4 Treat Yourself With A One-Off Purchase
With extra money on hand, we might be tempted to treat ourselves with an expensive purchase. This could be in the form of a fancy meal, new clothes, the latest tech gadget, or household appliances.
What you can do instead: Protect Your Life And Health!
We can still treat ourselves in other ways. You can always opt to treat yourself with something that is both meaningful and important for your health. For example, you can use the extra cash to sign up for exercise classes and other health programmes such as AIA Vitality. AIA Vitality members receive gym membership and sports apparel discounts while improving their health.
Alternatively, you can also put your bonus to good use by buying a life insurance or health insurance plan to protect yourself. A life insurance plan will provide income protection for your loved ones in the event that you are not around, while a health insurance plan will ensure that you have sufficient income in the event that you incur medical cost. AIA offers a wide range of both life and health insurance plans which you can consider.
(Information in this article is correct as 18 November 2019)