What to do when you get a bonus or windfall?

It is that time of year again, when the lucky one’s will be receiving their Christmas bonus. You have probably already spent the money in your mind. Hopefully only in your mind and you haven’t already purchased something that will need to paid when your bonus is due!


Bonuses don’t come along everyday. As an employee you will generally get an annual bonus or a 13th cheque. Usually this comes in December, which gives added pressure to using it to pay for that awesome holiday or buy the kids those much wanted toys or video games. Maybe spoil yourself!

But you need to take a step back. These bonuses don’t come along everyday and yet these small windfalls could be used to get you financially secure for the rest of your life! You just have to decide to use them wisely.

So what is wise you may ask….

1. Putting this lump sum in the bank?
2. Paying it into your mortgage bond?
3. Settling an account?
4. Adding it to your retirement saving?
5. Investing.
6. Spending it on something (hopefully a large purchase) you want?

1. Placing it in the bank:


Sadly in this day and age the bank is not really the best place for you to save your money. The interest rates are low even on fixed term investments and the temptation to spend the available balance in your bank account is way too high for most of us to stand. If you do choose this option make sure it is an interesst bearing account you can't withdraw from for a fixed period of time.

2. Paying it into your mortgage Bond:

Placing the amount into your bond would be a wise decision, the total bonus will then be taken off your capital and your bond repayments will decrease permanently, any future interest rate hikes will have a lower effect and your property will be paid for in a shorter period of time.

If you fix your repayment amount to the current amount you pay your loan will be paid off in record time!
If you have other debts, however, this may not be the best option as the interest rate on your home loan is lower than other loans.

3. Settling an Account:


If you are paying down debt this may be one of your best options. You can settle a credit card, close your store account, pay off a personal loan or rid yourself of that pesky overdraft. These are high interest debts that you don’t need. The year ahead will look much brighter if you are able to save a little instead of live month to month.

4. Adding it to your Retirement:


Using the windfall to top up your retirement policy is another good option, we tend not to save enough towards retirement and an added capital injection would bring the policy payout up and turn it into a more inflation beating policy. Helping to ensure you retire without worry. The added advantage of this option is that on most retirement policies you are not taxed on the payout.

5. Investing

Starting an investment account for the stock exchange – risky but if you are young enough this option could end up being very profitable and help you realise your dreams. If you are a little older and more conservative but still want to invest, try a mutual account or purchase some unit trusts. Remember the key investment strategy is diversity! As the saying goes, “Don’t keep all your eggs in 1 basket”

6. Spending

If you were planning on making a big purchase using this to pay for it as a cash purchase as opposed to buying on credit is another option, not as good as investing but better than obtaining further credit. Perhaps you really need a fridge for your new apartment or your washing machine just gave up the ghost. Either way avoiding the debt trap is better than paying the extra interest!

Making the choice:


Deciding what to do with your windfall is dependant on your current position in life. Your past decisions and your future dreams will play a role. Choosing wisely can save you a pretty penny in the long run.

The worst thing you can do with a windfall is spend it on small items here and there. It disappears faster than you can say you had it. I use this trick for my bonuses and windfalls and it never fails:

Deposit the money into a saving account and do not touch it for 30 days.
If you keep it in the bank for the full 30 days you will have dreamt about what you should be spending it on or where you should be saving or investing it. You will have looked at your options, determining the consequences of each choice and you will make a wiser decision.