If you’ve  received a 13th cheque or tax refund this past year then you’re one of the lucky South African consumers with only a small percentage of South African’s getting a little something extra this year.

While it can come as a surprise during tough economic times and It can bring some financial relief (if used prudently) especially as December is one of the most, if not the most, the expensive time of the year, it’s not always advised to splurge that additional income.

If you did some financial planning to ensure you spend sensibly throughout the year it will make your ‘little bit extra’ work for you and set you up for future financial freedom.

If you want to know how best to use that extra income first you need to identify which one of the archetypes fits your profile best and then have a look at what we recommend you should do with your additional income.

The Spender

It’s is always fun to do a bit of splurging, why work if you’re not going to reward yourself. This is the mindset of many of the working and middle class but, as you may well know, life is expensive and economic times are currently tough for South Africans.  If you’re a spender you’re more likely to have racked up some credit purchases going into December that will need to be paid off and as tempting as additional spending may be, it may be time to call it quits.

We recommend:

Ezdebt, therefore, recommends that you only spend a little or none during the December period (if you can really afford it) on gifting and luxury items. Rather spend a few bucks on paying off your credit card or reducing your debt, instead of being a risky spender by spending all your bonus money on unnecessary, expensive items.

For more tips on how to curb or change your spending habits check out these articles:

The Saver

If you are a saver you more than likely have accounted for all your spending during the end of year period and should be covered regardless of the additional income. You are in a strong financial position to save your entire bonus or have money left from your tax refund amount (after your necessary debt payments etc.), why don’t you save it?

We recommend if you do have debt:

If you have debt have a look at your interest rates on the debt your paying, see how you can split the additional income into servicing debt. Then put some away to earn interest to help you have something in the long run once you’ve completely serviced your debt. How you want to make the split between servicing your debt and adding to your savings is completely up to you and the situation you find yourself in.

We recommend if you don’t have debt:

Put your entire bonus or a part of your tax return into your rainy day/emergency fund or add to your additional savings plans. Life happens and you never know how much your ‘little bit extra’ savings may come in handy, especially when you really need it.

For more tips on how to save check out these articles:

The Investor

If you are the type that diversifies their income stream then that a bonus or tax refund can be put to productive use by paying off excessive debt. So if you relate to this, there is one of two things that you can do:

We recommend if you do have debt:

  1. you can either make use of the so-called snowball effect by paying off your smallest debt first (like a clothing account); or
  2. you can use the avalanche method – where you add the money to help pay off your debt with the highest interest rate first, like your credit card.

We recommend if you do not have debt:

Since its money, you did not expect to have in the first place losing all of it shouldn’t be a problem. You could use this money to diversify your portfolio into more aggressive stocks or funds and see if you can make that lump some work even harder for you with high returns.

For more on improving your investment and using money wisely check out these articles

Always have a plan

Regardless of your financial situation, failing to plan is planning to fail and with smaller margins to work with making mistakes can be costly.  Remember the festive December –  January period can be a very long month if you do not consider using your ‘little bit extra’ wisely.

Manage your debt effectively

If you still need help with your savings and you’re feeling overwhelmed by your current financial situation, feel free to contact us. To Speak to one our consultants about debt review contact us here.