For many people, the start of the year is usually the time to set some new year resolutions and at times, it also signals the arrival of the big fat bonus to reward you for your hard work over the past year.
Here at Dollars&Sense.sg, we would like to congratulate those who have a little extra coming in for their next paycheck. However, more often than not, instant paydays are easy to celebrate and can disappear without a trace when you are not careful.
Therefore, if you would like to use that hard-earned bonus wisely, we highlight 4 suggestions below to get you more organized, financially.
1) Cut down on your debt
The first priority has to be cutting down any existing debt that continues to eat into your monthly salary. With a reduction in debt, you can save money on interest payments and improve your credit score, which may lead to even more savings in the long term.
2) Save for a Rainy Day
If you have a financial adviser, he/she would have probably advised you that a good financial plan includes at least three to six months worth of emergency savings. On the other hand, if you are reluctant to fork that out from your regular paycheck, you can consider funding an emergency account with solely your bonuses. Saving for a rainy day might just be that cushion that will protect you from relying on your credit cards for unforeseen circumstances in the future.
3) Invest for your Retirement
With the reduction in board lot size from 1,000 to 100, investing in Singapore blue chips has become much affordable. As of 16th January 2015, a S$3,000 bonus would enable you to diversify your portfolio by purchasing 100 shares of OCBC, Singtel, Singapore Exchange and KeppelCorp each.
Nevertheless, before you get too excited and rush off to buy them immediately, do remember that homework still has to be done. You should not be any less careful just because the bonus is like a windfall. Ultimately, putting your money to work wisely can potentially generate you an additional stream of income moving forward.
4) Refresh yourself
Last but not least, what is life when you only work all year long but have no enjoyment to speak of? For that reason, we advise that you should go ahead and indulge to fight off that frugal fatigue if your finances are tidied up nicely.
By taking the family on vacation or buying something you have set your sights on a long time back, you would be more motivated for the upcoming year. Who knows, you may even get promoted because of a change in attitude and mindset from the vacation you took after collecting your bonus!
Conclusion
To sum it up, the most exciting part of getting a bonus is deciding how to spend it. If you wish to spread out your bonus for different uses, many financial planners have advocated a 50-30-20 rule: 50% of your budget toward necessities and paying down debt, 30% for discretionary use, and 20% toward savings.
Of course, you do not have to follow the guidelines strictly. Personally, I feel that maximizing the utility of the bonus is the most important. If you put that bonus to work for you wisely, you could see it continue to reward you over the next 12 months —and beyond.
Picture credits: someecards.com
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