When we find ourselves with a little extra in our pocket, the urge to splurge can be overpowering for a lot of us, especially given how easy it is to shop online.
RateCity has compiled a few ways you can spend your bonus wisely and make your money work for you.
Save your bonus
While it can be tempting to immediately spend a bonus, putting your money into a high-interest savings account will help to keep your savings growing. Plus, it will help you reach your financial goals faster as the interest accumulates over time.
In the event of an unexpected occurrence, having a savings or emergency fund will give you the peace of mind that you are covered and you can access this money ASAP. Experts advise that the safest amount to have saved is three to six months’ salary.
Invest your bonus
Another way you could spend your bonus is by purchasing shares. Whether you’re new to the stock market, or you’ve been investing for years, buying and selling shares is an exciting way to invest your bonus. To buy and sell shares, you’ll need a broker. If you don’t have a lot to invest, consider using a discount broker, as full service brokers can charge three or four times the brokerage fees.
If you want to invest your bonus, but the idea of spending all of it on shares and brokers is a little intimidating, you could consider one of the many apps available that invest your money for you.
Acorns is a popular investing app in Australia that utilises your spare change by investing it for you. Whatever small amount you spend, Acorns will round up that purchase to the nearest dollar and invest the difference. For example, if you spent $12.50 on lunch, Acorns will take 50c and store it in your portfolio for investment.
If stocks aren’t your game, apps such as BRICKX offer users a simple and low cost way to get into the property market. You are given a range of properties to choose from, and for under $100 you purchase a ‘Brick’ – a portion of the property. At the end of each month, users receive a share of the net rental income and you are free to sell your ‘Bricks’ at any time. You can grow and diversify your property portfolio for a fraction of the price of buying a house.
It’s also wise to invest in your future and make extra contributions to your super fund. ASIC advises that you can really boost your super savings by making after-tax contributions, as these payments do not get taxed. There is a limit to how much you can contribute to your super before you have to pay tax, and this information can be found on the Australian Taxation Office’s website. Most people can contribute up to $30,000, including your employer’s 9.5 per cent super guarantee contribution. For those 50 and over, you can usually contribute up to $35,000.
Pay off debt
You could also consider using your bonus to pay off any outstanding debt, such as a home loan. Making additional payments on your mortgage will help you to pay off the debt faster, as the extra payments are going towards the principal of the loan rather than the interest. However, if your home loan has a fixed interest rate, you may incur fees or have a limit on the amount you make in extra repayments, so it’s important you do your research.
You can use RateCity’s online calculator to work out how much interest you can save by making extra repayments.