How to spend your bonus wisely

As the year comes to an end many people begin to think about how their December bonus will fund their planned summer holiday or some other longed-for luxuries. But before you blow it, take some time to consider your best course of action, especially if you are indebted.

"To avoid being part of the statistics of people who are drowning in debt, use your festive season pay cheque wisely," says Rajeen Devpruth, manager at the National Credit Regulator. He suggests people use their December salary and 13th cheque, or bonus, to pay off debts, starting with their home loan. "It is wise to do this because interest rates are low and you can reduce your interest burden for the future."

Here are some other ways to use your bonus wisely:

• Be proactive and double up on your regular payments, such as your bond or rent, lights and water as this will give you some breathing room after the holiday season and to help you cover costs such as school fees and uniforms;
• Try to live normally during the festive season rather than making dramatic changes to your spending patterns. If you have to borrow money, make sure it is for necessities only and ask for a pre-agreement statement and quotation beforehand;
• Draw up a budget, adding your bonus to your other income to get a clear idea of how much money you will have. Plan how much you want to spend over the festive period. Make sure you include living expenses (such as rent/mortgage bond, lights and water, insurance, debt, school fees, stationery and school uniforms) along with the extras you want to get. Make provision for savings in your budget too;
• Work out how much you will need for holiday entertaining, donations to charities and any other "unseen expenses". Compare this to your income and see if you can afford it; and
• If the money available after paying for essential expenses is not enough to pay your debt, you will need to cut or adjust your spending - entertainment, alcohol, gambling or pay TV are good places to start. If you still cannot make ends meet, speak to your credit providers.