- November 22, 2016
- Posted by: MoneyJunction
- Category: Bonus
Get a guaranteed tax-free return
Let’s assume that you get a R10, 000 bonus and instead of blowing it, you decide to put the money towards paying off your house. If your bond is sitting at R600, 000 and you deposit the R10 k into your bond account, you will eliminate R11, 500 in interest charges if you have an interest rate of 9%.
Investing to beat inflation
OK so you don’t have a bond, how about investing the money. If you bought some Unit Trusts and earned a 9% return over three years, you will have grown your bonus by R3000 and if you invested over 5 years you would have earned R6650.00. While this may not sound terribly exciting on its own; if you invested your bonus every year for five years at a return of 9% pa with an inflation liked increase of 5% pa, you would amass R71,500, 00. If you then just left this money to grow for the next 10 years without adding a cent it would turn into R174,222 – not bad for sacrificing 5 bonus cheques.
If you don’t have a retirement plan then your R10, 000 would be a great kick start. If you get an annual increase along with your bonus, then use the increase to add to this investment every month. You may think that saving say R500 per month, may not be worth it but if you invest R500 per month for 5 years at a return of 9 % and an escalation of 5% pa, you will have saved R41,200. In addition, your R10, 000, will have grown to R16,150, 00. These figures show that even saving a small amount can build your wealth.
Instantly cut your bills by R250 per month
If you are like the average South African and carry a lot of clothing account debt, paying off your accounts will make your finances significantly healthier. If you settle card debt of R10, 000 you will free up around R250 per month. You could use the money saved to start an investment plan, pay off your car, or save towards your own home. Rather have one credit card than a lot of smaller accounts. They are easier to manage and cheaper in terms of interest rates. If you have been worrying about not having life cover to protect your loved ones, by eliminating debt payments you will be able to free up cash to buy much needed insurance.
Look after your wheels
By maintaining your car and keeping it for longer than 4 years you will save significant money. Give your car a thorough service to keep it running smoothly for a few more years. If you buy three R100, 000 cars in a 12 year period you will have forked out over R150, 000 in interest charges- enough to pay for another new vehicle. If you don’t have insurance cover on your car, you are taking a big risk. R10, 000 will cover you for over 2 years, depending on the car you drive. With over 1 Million car accidents reported each year, the risk of being involved in one is extremely high, don’t take chances. While this won’t double your money it will save you a small fortune should you have an accident.
When was the last time you spent money on your education? Gone are the days when you could leave school or college and do the same job for twenty-five years without learning new skills. Whatever industry or service you are in, the changes and developments are moving at the speed of blur. If you do not continually educate yourself you may be left behind. Do not wait for your employer to offer training, go out and do it on your own account and reap the financial rewards that come with it. If you feel you have enough education, invest the money for your kid’s education.