A pleb’s guide to spending your year-end bonus

Not everyone is a top exec. The countdown to that long-awaited year-end bonus feels like it drags on forever, especially as payday approaches. You think, “I can finally splurge on that …”  But wait – is that really the best idea? Should you pay off your credit card instead? And what about school fees, uniforms, books and stationery? Sigh. 

Life, huh? Adulting. Ugh. The joy of your bonus quickly evaporates. And just wait until the dastardly taxman swoops in and takes his share! 

If you weren’t disciplined with your money during the year, this holiday season might call for sacrifices – and a firm commitment to getting your finances in better shape in 2025. Still, there are ways to extract some pleasure from your financial fillip, assuming you received one, while meeting your financial goals. 

Here are some tips from Ninety One and a few others on how to handle a bonus: 

• Spoil yourself (responsibly): You’ve worked hard for your money, so it’s okay to treat yourself a bit. Just don’t go overboard, especially if you’re in debt. So keep your bonus spending under 10% and, generally, aim to invest at least 10% of your monthly after-tax income. 

• Tackle short-term debt: Pay off personal loans, credit card debt, and store credit as soon as possible. These are the most expensive debts, so getting rid of them will improve your financial health. Capitec advises using a “sizeable portion of your bonus to pay off debts, especially those with a high interest rate”. So, don’t make some rubbish resolutions about eating kale, going to the gym and giving toxic people in your life another chance, just avoid any new loans.  

• Build an emergency fund: Save at least six months’ income in a money market fund for emergencies only. This fund will help you avoid dipping into your retirement savings or taking on expensive credit in case of unexpected expenses. Capitec proposes splitting your bonus into three portions: a car deposit, holiday and emergency fund. Also, if you’re paid early in December, remember the curse of having to make your money stretch until the end of January. 

• Invest in a retirement annuity: Consider investing up to 27.5% of your taxable income (up to R350,000 per year) in a low-cost retirement annuity. Do this at the end of the tax year (February) and use any tax refund to pay off long-term debt or invest further. 

• Max out your tax-free savings account (TFSA): Invest up to the annual limit of R36,000 in a TFSA. These accounts are great for saving towards specific goals or supplementing retirement savings, as they aren’t subject to income or capital gains tax. 

• Pay down long-term debt: Use any remaining funds to reduce long-term debt, like your home loan. This will ease your monthly financial burden, especially with rising interest rates. If you have an access home loan facility, consider this extra contribution part of your emergency fund. 

• Start investing. Finally, consider investing in shares, unit trusts or ETFs.  

“The very act of drawing up a bonus budget has mental benefits too – it’s a commitment to sharpening your budgeting skills,” according to Nedbank’s guide to making better choices with your bonus. The lender suggests even considering renovating your home if you’ve paid off your short-term debts and boosted your emergency savings. 

Standard Bank Group’s insurance division, Liberty, advises paying school fees upfront, as this may attract a discount, the savings of which can be used for uniforms and other necessities.  

But year-end bonuses can no longer be taken for granted and “13^th cheques”, which are the equivalent of an extra month’s salary, have been phased out by many organisations.  

Debt Busters, a company that helps consumers who are financially stressed and struggling with debt, warns that many businesses are cutting back on expenses by cutting annual bonuses because of South Africa’s tough economic conditions.  

“The sad reality is, the majority of consumers don’t use their ‘extra salary’ intelligently. The typical 13^th cheque gets spent on anything from extravagant TV screens to fancy holidays, most of which the consumer can’t really afford,” the firm says. 

“Many consumers spend their 13th cheque by buying items on credit before they even receive their bonus,” it adds, and then the company doesn’t deliver. “If that happens, you’ll have spent money that you really don’t have and will never get back.” 

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