It’s that time of the year! You may have received or are going to receive your bonus soon. Give yourself a pat on the back for all the hard work you’ve put in throughout the year.
The lump-sum bonus amount gives you the freedom to go on that luxury retreat you saw months ago or buy the premium smartphone you’ve always fancied. While indulging yourself once in a while is important, preparing for the future is equally important. Instead of spending all your bonus without a care in the world, it’s wise to allocate a portion for rainy days and to meet your future needs.
Here are four steps to help you budget your bonus smartly.
1. Clearing debt
Your high-interest debts can drag down your financial goals. Piling up debts can throw you into a hand-to-mouth situation or, even worse, in case you land on a rough patch. For loans with interest rates higher than 5%, such as overdue credit card bills or personal loans, consider clearing these loans or at least part of them. This will help you avoid defaulting on your payments and racking up interest charges. More importantly, this reduces the stress of having to make payments on time each month and gives more peace of mind.
2. Set aside rainy-day funds
After clearing your debts, the next important step for maintaining financial stability is topping up your emergency fund. Life can be unpredictable, and things can happen. As a rule of thumb, you should set aside 6 to 12 months of monthly expenses for your emergency fund. For instance, if your household monthly expenses are A$5,000 per month, you should have at least A$30,000 in your emergency fund. This will serve as an umbrella on rainy days.
However, keeping some funds for emergencies doesn’t necessarily mean you should let your cash sit idle in your savings accounts, earning comparatively lower rates. You can opt for cash investments that are ultra-low risk and highly liquid.
3. Invest to grow your money
After clearing lingering costly debts and setting aside funds for contingencies and retirement, the next logical step is to invest your bonus. Every dollar you invest is a seed for your financial future. When you decide to invest, your strategy will depend on your life stage and current financial goals. Here are some options that can be considered when putting together your investment plan.
In a Growth or passive income mode
Depending on your risk tolerance, you can choose to invest in Syfe’s Smart Baskets. Smart Baskets automatically diversifies your portfolio based on your needs and optimises it for either growth or income. Over 1,000 hours of development has been devoted by wealth experts to finetune Smart Baskets.
DIY Investing
If you prefer a more hands-on approach, consider buying stocks and ETFs with Syfe. You can choose from over 12,000 ETFs & stocks across the ASX & US markets. Syfe lets you purchase with full price flexibility with low costs.
4. Give yourself and your family a treat
While you chart out a plan to grow your wealth, don’t forget to give yourself and your family a treat. Spending mindfully on things you enjoy will improve your satisfaction levels and motivate you to work harder. If you have a sorted financial growth plan, indulging yourself a bit is not a bad idea to start your year.
Ready to Start?
The best day to start investing was yesterday, the second best day is today. Maximise your year-end bonus by kickstarting your investment journey today.
