As we race towards the end of 2015 and a well deserved break, some of us are fortunate enough to receive a 13th cheque or bonus. Although it is tempting to spend this money on upcoming festive season activities, the recent interest rate hike has left many consumers unsure as to how they should be spending this extra money.
The recent repo rate increase by the South African Reserve Bank may steer many South Africans to use the biggest portion of their 13th cheque or bonus to service their debts, this however leaves very little available to save or spend on festive season activities.
“This year, more than ever, consumers should consider saving a portion of their 13th cheque or bonus. Although we know that the rate increase will eat into consumers disposable income, this extra end-of-year income can assist to not only settle some of their expensive debt, but also provides consumers with the opportunity to gear towards a financially sound start to 2016 and thus help in breaking the debt cycle,” says Lezanne Human, CEO of FNB Savings, Investments and Fiduciary.
By saving a portion of your extra money you can ensure that you are prepared for known expenses such as school fees, uniforms, stationery, back-to-work expenses and annual premium increases; but also that you have a buffer in place for any emergencies that may arise. As you earn interest on your savings, you are ultimately stretching your bonus much further.
A rate hike also means that you will earn more interest on your savings. What’s more, with FNB cash savings or investment accounts your capital and quoted returns are fully guaranteed, meaning there is no risk of losing your hard earned money.
Why not take a more balanced approach this year to make the most of your extra money by considering the following:
- Making inroads to expensive debts – You don’t have to pay off all your debts at once; instead use some of this extra money to pay off your higher interest bearing debt. This will assist you to reduce outstanding capital amounts which will in turn reduce future interest charges and monthly repayments. These reductions will improve your cash flow, allowing you to have more disposable income and be able to save more.
- Financial stock take – Review your savings and expenses for the year gone by and calculate more or less what you spent each month. You should not only look at the debit orders that have gone off your bank account but also tally up all the other ad hoc expenses. Once you have a snapshot of your financial position, you’re in the best position to draw up a budget which puts your extra money to good use and you then need to do your best to stick to it. Being disciplined with your budget will allow you to free up some of your money and determine how much of your extra money you can save and spend on some festive season fun.
- Have a buffer in place for the unknowns – Remember to save a portion of your 13th cheque or bonus for those unexpected emergencies. By having an emergency fund you can ensure that you have money available so that you don’t have to service these emergencies by incurring more even debt.
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