Don’t you agree that one of the best things about the end of the year is the year-end bonus? It’s like a lovely Christmas and New Year’s gift rolled into one and is sizable enough that you can actually do something substantial with it.
Now that we’re at the very end of the year, I think you and I still have enough left that you may be wondering what you can do with it. Like most people, when I was younger, I would have just chucked it into the bank, and left it there.
(Who am I kidding here? When I was younger I would have spent it all on a big-ticket item. But that was then, and I am so glad that I’m older and wiser now! Part of the reason I advocate for financial literacy is that I made bad money decisions when I was younger. I want to help other women learn to be money savvy earlier, rather than later.)
Hey, if you still have some, or all of your year-end bonus left, congratulations! You’re wiser than I was at your age. Now, before you just automatically deposit it into your account, let me give you a few nuggets of advice as to where you can put your bonus.
Pay any outstanding debt (especially high-interest loans)
Do you have any credit card debts? Pay them back. In full. If you have a study loan, consider using your year-end bonus for paying it back. The same goes for any personal loans, informal loans you made to your parents, grandparents or any other relatives. The last bit may not be high-interest, but still.
Paying back loans achieves two things. One, you end up saving on interest. As the folks over at the Dollars and Sense blog say, by paying your debt, “you immediately save on the interest (and future interest) that you need to pay, had you not use your bonus to pay down the loan.”
Two, it prevents you from getting into the habit of living with personal debt when you can pay for it. Sure, when friends ask, “What did you do with your year-end bonus? And you say, “I paid off my debts,” that may unsexy to them.
Let me tell you something, it’s one of the smartest things you can do. And smart IS sexy.
Pro-tip: if this is the first year you’ve been using a credit card and can’t seem to get the hang of how it works, head over here to read all about Credit Cards 101: Common Mistakes To Avoid On Your First Credit Card. It will be a big help.
How about voluntarily topping off your CPF?
This is another very smart thing to do—believe it or not. Why would you think of adding to your CPF, when you may already be feeling that it’s taking a chunk of your paycheck already?
Here’s the thing. Again, from our friends from Dollars and Sense: “Firstly, you earn a risk-free interest of 4% to 5% for the years ahead. Imagine if you are 25 and contribute $3,000 this year. This amount will become more than $9,700 by the time you are 55. In addition, you also reduce your income tax.”
How’s your emergency fund coming along?
I’m assuming, of course, that you already have an emergency fund. Or at least you have started putting aside three to six months worth of savings for whenever life throws us curve balls, which it sometimes does.
No? Okay, not to worry, I’ve got you covered. Hop on over to this page and I’ll tell you all about the hows and the whys of starting an emergency fund, no matter how old or how young you are.
Okay, you may already have an emergency fund, and it’s all squared away. The problem is that what you set aside back then may not be enough for your lifestyle now. Remember, when it comes to our lifestyles, it’s harder to adjust downwards then it is upward. You don’t want to find yourself struggling because you’re having to do without some creature comforts that you have gotten used to.
So, take a look at your emergency fund vis a vis your expenses now, not when you started it. Do you still have enough to support your lifestyle now, for a minimum of three months? Ideally, six months, as you know. If the answer is no, consider taking some of your year-end bonus and adding to your emergency fund.
This is really good for you, whether you feel it or not. The more you are in charge of your financial future regardless of whatever might come your way, the more empowered you are.
Give some away.
What? Am I actually telling you to give away some of your hard-earned bonus money? What am I thinking here?
Yes, I am. There is nothing like a voluntary donation to a deserving charity, especially at this time of the year, that can make you feel good. It really is better to give than to receive. It keeps us recognizing the blessings in our own lives. It keeps us thankful and humble.
You can give to charities or deserving foundations either locally or abroad, and the best thing about it is that it’s tax deductible. And for this year, “The current 250 percent tax deduction will be increased to 300 percent for donations this year, with the tax incentive also being extended until the end of 2018.”
So, for every dollar that you donate to charity, three dollars will be subtracted from your taxable income for 2018. I call that a win-win situation!
Treat yourself a little bit
And when I mean treat yourself, I don’t mean the iPhone XS, a Google Pixel 3, a luxury handbag, or a designer watch. Of course, I would never stop you from buying something you really like, but I have a better idea.
What I really mean by treating yourself is investing in yourself. Buy some books that are geared toward self-improvement, to making you a wiser and more well-rounded person. Or take a look at some online courses that you can take in your free time, starting from this Christmas vacation. Maybe you’ll be learning a new language, picking up a new skill, or upgrading your current skill set to stay ahead of the game.
You have to know that you are definitely worth it. We put our resources toward investments that are guaranteed to have good returns, don’t we? What could be a better investment than you?
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