Should you use your bonus to pay off debt, save or spend it on luxuries?
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Aneesa Mehta should prioritise using her bonus to pay off any outstanding debt, whether it’s a credit card bill, personal loan, car loan, or a home loan. Credit card debts, for instance, can carry interest rates as high as 36% per annum. While allocating the bonus to debt repayment might feel like spending, it can lead to significant monthly savings by reducing future interest payments. Once her debts are under control, Mehta should focus on building an emergency fund if she doesn’t already have one in place.
After her debt and emergency fund are taken care of, Mehta can split her bonus between saving and spending. After a year of hard work, indulging a little is well-deserved. A small, intentional purchase can help curb the urge to splurge on frivolous items. Choosing a lasting experience over instant gratification, such as a short, affordable holiday, might offer greater value than buying jewellery. The remaining amount can be allocated to other upcoming expenses like house repairs, new car, or a short-term course. She could also set aside the sum for long-term goals, such as retirement savings.
Mehta’s options for using her bonus are endless. Deciding how to allocate it doesn’t have to be a strict choice between saving and spending; it doesn’t have to be an either/or scenario. The key consideration is her financial
