While there’s nothing stopping you from using a small portion of your bonus to spoil yourself and your family, a great strategy is to immediately move your bonus to the “hands-off box”. Tyrone Lowther, head of Budget Insurance says moving this money from your current or cheque will remove the temptation to spend it all at once or on purchases that you have not carefully considered first. 

“Be sure to leave your money where it earns the most interest. Then, if you have any outstanding debt with high interest rates such as credit cards and personal loans, pay them off. Or you could consider putting some of your bonus into your bond — you could pay it off quicker and save a lot of interest in the process,” he says. 

Francois Viviers, group executive of marketing and communications at Capitec, adds that you could divide your bonus into three categories: 50% for paying off debts, 30% for long-term savings and 20% for holiday expenses. 

Viviers points out that paying off clothing accounts, loans and credit card debt can bring you closer to starting the new year debt-free. 

“If you owe R4,000 on your retail (store) account and pay it off at an annual interest rate of 21%, you’ll pay R1,251.77 in interest (and a total of R5,251.77) over a year. If you use your bonus to pay off the R4,000, you’ll save R1,250,” he says.

Once you’ve ticked those boxes, here are five ways to use your bonus to put more money into your pocket via tax deductions or savings: 

1. Boost your retirement annuity savings. You can invest as much as 27.5% of your taxable income in a retirement annuity each year. All contributions up to a maximum of R350,000 can then be claimed as a tax deduction.
2. Tax-free savings accounts. Your annual limit for tax-free savings accounts is R36,000. The best news is that you don’t pay income tax, dividends tax or capital gains tax on these investments.
3. Emergency savings. Hearing that you should have the equivalent of three to six months’ salary in your emergency savings can be quite daunting. Use your bonus to kick-start your emergency savings and keep topping it up until you reach your target. Future you will be happy you did this.
4. Up-front annual payments. You can often leverage an up-front annual payment in return for a discount. School fees are the most common example of this, with discounts of 5% to 7.5%. Ask your insurer if you will receive a discounted rate for an annual premium payment. If you own a car, set money aside for annual service costs, maintenance and tyres.
5. Charitable donations. Spread the love a little by making a donation to your favourite charity. A bona fide donation to a Section 18A-approved organisation will qualify for a tax deduction. Remember to save documentation including the public benefit organisation (PBO) reference number, date of receipt and the amount of the donation. You can find a list of Section 18A-approved PBOs on the SARS website. DM