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A person putting a deposit down on a house using their 13th cheque

How to Spend Your 13th Cheque Wisely

For many employees in South Africa, receiving their 13th cheque not only provides them with a sense of happiness, but also a sense of relief, as this is often the financial lifeline they have been waiting all year for. Unfortunately, the sad reality is that the majority of people fail to spend their 13th cheque wisely and often land up struggling with bad debt, just as they were the previous year.

Usually, a person’s 13th cheque is spent on new electronics, expensive holidays and Christmas gifts, all of which the person cannot actually afford. This extra cash often gives people a false sense of freedom, making them believe that they can afford to splurge their 13th cheque whilst they should really be spending it wisely by doing things like paying off their bad debt. Shrinking your debt will improve your monthly cash flow, reducing your financial stress.

In this blog, we outline how to spend your 13th cheque wisely so you can avoid going into bad debt:

13th cheque spending tips

  • Don’t spend it before you even get it

Many people go into debt during the year, with the hope of paying off their debt with their 13th cheque. This is a big mistake! When businesses are going through tough financial times, the first thing they do is cut back on expenses by reducing or omitting annual bonuses. Don’t make the mistake of spending your 13th cheque before you even get it, rather wait until you receive the money before deciding what you are going to do with it.

  • Settle your unsecured debt

If you are fortunate enough to receive a 13th cheque, you should always start off by paying off some of or if possible, all of your debt. This can include things like credit card debt, store card debt or personal loans. Using your 13th cheque to pay off your existing debt will prevent you from becoming trapped in debt. If you are feeling trapped and your bonus won’t help you cover your outstanding debt, contact Debt Movement for non-judgemental advice. 

  • Pay down your bond

If you don’t have any unsecured debt, then you should consider using a portion of your 13th cheque to reduce your home loan. This offers enormous benefits, even from just a once-off payment. By paying more than the minimum amount required into your bond, you will not only reduce the time outstanding on your bond, but you’ll also save on  the interest when it’s applied against the life of the bond.

  • Top up investments or your emergency fund

If you don’t have any debt or other financial responsibilities, then you should consider topping up your Tax-Free Savings Account (TFSA) or your emergency fund. 

In terms of South African legislation, you are allowed to invest up to R36,000 per year into your TFSA, this amounts to a maximum monthly payment of R3,000 (or an annual lump sum of R 36,000 instead). The total lifetime contribution limit of a TFSA amounts to R500,000, this amount excludes any interest earned on the investment. If you don’t have a TFSA and you would like to open one, be sure to contact Affinity Wealth who will be able to assist you in opening a TFSA or with any other investment help you may need.

At Debt Movement we know that bad debt happens to good people. We provide professional debt advice and solutions to help you move out of debt..Our team has helped thousands of people out of debt and become financially free. Request a free callback to discuss your debt.