If you are lucky enough to get a year-end bonus you should take stock of your finances and look for opportunities where you can best allocate some of the cash.

Save first then spend the rest

It’s year-end and of course you have to splurge a bit. However, save a portion. Nudge a bit off that debt. Your debt ratio to income should ideally be 30%. Every rand closer is effectively the same return as the interest rate being applied to your debt.

Challenge yourself to keep as much of the bonus as possible and then spend every cent of the rest. The more you keep the better you will feel in January after the festivities are over and the blues set in.

Target your high interest debt

Debt is the first port of call. Choose your highest interest bearing debt. Effectively, your return will be the rate of interest being charged.
For example,
Your credit card charges around 22% per annum. Every rand that you can knock off this debt will effectively give you the same return.
To get 22% from an investment will take some risk of losing capital.

Store for a rainy day

Do you have a contingency fund for emergencies and unforeseen expenses. Money market accounts are ideal for this as they offer higher rates of return than retail savings accounts and provide immediate access to your funds when you need them.
Generally, one should have between 3 and 6 months of one’s monthly expenses.

Focus on saving

Make a commitment to yourself to save on a monthly basis using a portion of the bonus as a kick start for your investment. ETF’s and unit trusts are the ideal way to get going. Challenge yourself to save this amount first, every month, and then you can spend the rest. Saving a bit over time has astounding results with the power of compound interest.

Attitude

So much wisdom is found in the old proverb.
A bird in the hand is worth two in the bush…

It really just boils down to attitude. Wealthy people focus on investing their hard earned cash. That’s why they are wealthy. They have the attitude of:
Prepare for tomorrow
Delayed gratification … save first and spend the rest… living within the means…

Less wealthy people focus on spending their cash. Their attitude tends towards:
Live for today
Immediate gratification. I want because I want it…fly now pay later…

The extra cash is an opportunity to improve your financial well being. Don’t let it slip through your fingers.