1. Pay less for your short-term insurance:
Short-term insurers are prepared to give up to 15% discount on premiums if you pay them as a lump sum at the beginning of the year. This saves them the cost of collecting by debit order and, because they have your money upfront, there is less risk of defaulting or cancellation. You also know that your valuables are covered for the year. Make sure you take the monthly premium you would have been paying and use that to either escalate your debt payments or add to your monthly investments.
2. Protect yourself against interest rate hikes:
Any extra money you deposit into your home loan immediately reduces the capital balance and saves you interest. Even if you just deposit R10 000 into a R1 million mortgage – you save R64 800 in interest over the 20-year period, but an added benefit is that it can also protect you against a possible rate hike. On a R1 million mortgage, a 100 basis point rate hike would increase your annual mortgage payment by R10 000, or R833 per month. By paying money upfront into your mortgage you can create a buffer against future rate hikes.
3. Pay less tax:
You can invest 15% of your bonus tax-free into a retirement annuity or top up your company retirement fund. This will boost your retirement savings at the expense of the Receiver of Revenue.
4. Protect against increases in school fees:
Most schools offer discounts of up to 7% if you pay the fees in full at the beginning of the year. Not only does paying the school fees upfront save you money, it also gives you a jump start for the next year’s school fees. By saving the school fees you would have paid into a high interest earning account each month, the interest earned (combined with the discount) will give you a great buffer on the following year’s school fee increases.
5. Plan for your next holiday:
You can save a significant amount of money if you book your flights months in advance. Popular routes during peak times like July or December get booked up fast and the lowest airfares are usually sold out 11 months earlier. You’d have also spread the costs of the holiday over time, so you are not paying for it all in one month. On the other hand, great package deals are usually released about two months before the holidays, so have a lump sum kept aside to take advantage of these specials.
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