It is December and most employees can look forward to receiving their year-end bonuses.
For civil servants, the government announced last week a year-end pay-out of 0.65 month on top of the 13th month year-end wage supplement.
Before spending this windfall and then wondering where’d all that money go, here are 4 things financially savvy people can do with their bonus.
1) Contribute To Supplementary Retirement Scheme (SRS) Account
In a bid to get Singaporeans to better prepare for retirement, the government introduced the SRS to complement our CPF.
The main benefit of contributing to the SRS account is that every dollar contributed to the SRS account would reduce one’s taxable income by a dollar.
Depending on your taxable income, you could instantly save at least $900 by contributing the maximum allowable amount of $12 750 per year. The tax savings would be more if you are in a higher income tax bracket.
You could use the funds in the SRS account to invest in shares listed on the local bourse, bonds, unit trusts, fixed deposits and insurance to further optimise the returns.
To open an SRS account, you can approach any UOB, OCBC or DBS/POSB branches.
2) Repay Your Loans
In today’s society, many of us are taking loans – student loans, consumer loans or housing loans.
The thing about loans is that the interest rate makes us pay more for the initial purchase.
As with how compound interest benefits us when building a nest egg, it can also consume us if we allow it to spiral out of control.
Instead of letting the windfall idle in the bank, do consider putting it to good use by repaying loans in advance.
One thing to note before doing this is to ensure that the interest you save from the repayment is greater than the administrative charges imposed by the financial institutions. This is especially so for vehicle and housing loans.
Otherwise, it might not be prudent to make an early re-payment at all.
3) Indulge, But In Moderation
Life will be meaningless if all you focus on is to amass money and keep it in the bank.
Hence, my third point is that you should indulge a little to reward yourself for the hard work you’ve put in for the year, and celebrate life.
After all, a wonderful life is one where you have both the luxury of money AND time to spend.
Therefore, you deserve an occasional indulgence, be it to travel or to buy a new toy.
However, this indulgence should be a prudent one, so be sure to set aside only a certain percentage solely for the purpose of guilt-free indulgence.
Once the amount is decided, feel free to spend it in any way your heart desires as you’re assured that there is another portion squirreled away.
4) Give Some Of It Away
As we take a step back to appreciate the big picture that we have here – a job and a bonus, let’s not forget the less fortunate among us who are in need of financial assistance.
It is only by giving that one is able to receive.
The act of giving sends a strong signal to the universe that one is in a state of abundance and not scarcity.
On a quantum level, this act emits similar abundant vibes that will only bring more abundance and prosperity to the giver.
Additionally, knowing that one could make a positive contribution through a charitable act will bring about happiness in the giver.
As we celebrate the year end with our bonuses, let’s spend it wisely and be open for more financial blessings in the coming year.