The idea of a year-end bonus has become much less widespread these days, as many companies and employees change their conditions of employment. You’re fortunate if you’re in a salaried position that comes with a year-end bonus – either as a ‘13th cheque’ or some kind of performance bonus that is written into your KPIs in your employment contract. What would be the best way to use this windfall.

Invest your bonus money

We’ve discussed some useful ways to spend your bonus in a previous personal finance blog. Here are top tips to improve your personal budget:

• Paying down debt is always a sensible way to use some extra cash. While South African interest rates have come down recently, it’s a good idea to reduce any interest-bearing debt that you might have, like your outstanding credit card balance. Reducing the amount you owe reduces the amount of interest you pay.
  
  
• Emergency funds should be a priority, but many of us neglect these savings. You should have enough put away for 3 months of expenses at least. Get into the habit of putting any extra money into your emergency savings every month – and you could give it an extra boost with your bonus. Because you’ll need to access this money quickly in an emergency, choose an easy-access account such as JustInvest, available on the Money app. It allows you to withdraw the money with 24 hours’ notice.

Top up your tax-free investments

Investing some of your bonus in a tax-free investment (TFI) is a good way to make it earn you even more money. You don’t pay tax on interest, dividends, or capital gains on your investments in a TFI. You can legally save up to R36,000 each year, and R500,000 over your lifetime, without being taxed on those earnings. If your contributions are below those amounts, why not use some of your bonus to build wealth that won’t be taxed?

Spoil your loved ones on a dream holiday

Your bonus windfall could give your family the rare indulgence of a dream holiday, perhaps in an exotic international location. You can have an unforgettable experience while stretching your bonus budget. Here are some tips:

• Plan: Travel somewhere you have always wanted to visit locally, or pick an international destination that doesn’t require visas, which will save you time and money.
  
  
• Compare prices: There are always deals on flights, accommodation, and transport.
  
  
• Take advantage of loyalty programmes: Airline miles, airport lounges, hotel points and other hospitality benefits are common features in most loyalty programmes. Now’s the time to use them!
  
  
• Use travel apps: These can give you info on everything from last-minute travel and shopping deals at your destination to real-time currency exchange rates.

Upgrade your education or qualifications

Investing your bonus in further education or qualifications is an investment in a better future. An additional qualification, whether it’s in a related field to the one you work in or an upgrade on your current CV, is useful for many reasons:

• It enables you to look at new opportunities in your profession, with more to offer employers.
• It provides opportunities to increase your income bracket.
• Depending on your current standing, additional qualifications can be a pathway to leadership and management roles.
• Vocational or on-the-job professional training can also lead to further higher education opportunities.

Invest in art and collectibles

Alternative investments, especially in art and rare collectibles like classic cars, watches and high-end wines or whiskies, are an effective addition to a diversified personal investment portfolio. They can also be a profitable way to build value in your estate to leave as a legacy to your family.

They are physical possessions with tangible value, so they retain their worth more resiliently than intangible financial assets linked to market sentiment, like stocks and shares. In fact, many alternative investment categories, especially cars and whisky, have outperformed the major stock markets in recent years. Also, these kinds of investments have fewer tax liabilities, provided you buy them in your personal capacity.

Investing your bonus in a collectible could spark a passion that will enhance your life – there are some surprising examples of what an investment collectible might be. You might think collecting Lego sets, for example, is confined to enthusiasts, but even the humble plastic bricks have become highly sought-after in the secondary market and valuable for their investment potential. Limited-edition sets, exclusive collaborations, and discontinued sets have all been known to increase significantly in value.  

Here are some more alternative uses for your year-end bonus.

You don’t have to fund tax-free savings and investments from your bonus alone – they’re an important part of a balanced investment portfolio.

Consider alternative investments too – you could discover some hidden gems of the investment world.