SIMON BROWN: Work that year-end bonus

Ah December, finally. Year-end parties, fresh peaches. It’s time to start downing tools and head to a beach. But it is also a time of frenzied spending, which  for some started on Black Friday already. 

This week I want to talk about the lesser-spotted bonus. Some of you may be lucky enough to get that 13th cheque and the first thing is to remember it will be taxed. There is a trick here: in January, ask your payroll department colleagues to tax you a little extra every month. Add a 12th of your salary to your take-home pay so that you overpay tax during the year, and then the bonus can be received with tax already paid.

The biggie is, what to do with the bonus you get? 

Pundits will tell you to use it to pay down expensive debt and then save the rest. Noble ideas but divorced from reality; so I always suggest splitting a bonus into three parts. 

Part one I would use for any expensive debt and if you have none then pop it into an access bond. This is especially attractive at current high rates and you can use the extra money in case of an emergency. All the while it reduces the time to pay off your home loan and ultimately the amount of interest paid. Oh, and it’s effectively tax free. 

Saving or investing is always great, especially into a regulation 28 product as this will reduce your tax bill if you haven’t already exceeded the 27.5% or R350,000 limit (whichever is smaller). Further, you can’t access this money until you’re 55 or when the two-pot system kicks in, so it is safe. 

The last third — spend it. Wildly. Well, wildly, but with a plan. The holiday season tests our credit cards, so plan what you’re spending and try to stick to a Christmas budget to avoid the January hangover. 

Then when the presents are all unpacked, the tree put away and the reality of 2024 comes into focus, start to think about the year-end holiday season for 2024. 

As a family we started every year with a list of people we needed to give presents to and would try buy these during the year to avoid the end-of-year spending mania. We’d also stock up: January will have lots of sales and though Woolies crackers are great, they are also expensive. But often you see them on sale in January. The same goes for decorations and any other Christmas-specific, nonperishable things we need. 

And finally, have fun. This has been a tough year. All indications are that next year should be better. Maybe only slightly better with lower inflation and rate cuts, but goodness knows we need it.