Global inflation rates rose in 2022 as a result of major economic events that occurred that year. Singapore has been affected as well, as inflation rates have risen in recent months. The government has taken several steps to combat inflation, but it remains a major concern for the country. In addition to inflationary increases, 2022 was a significant year for economic announcements in Singapore, as the government announced plans to raise GST rates from 7% to 8% in 2023 during Deputy Prime Minister Lawrence Wong's speech at Budget 2022 in March of that year.

We’ve already entered 2023 and many Singaporeans have already felt the weight of the tax and inflation increases in their wallets and the need for good financial management has never been greater.

If you are among the fortunate few who receive a year-end bonus at the end of the year, it is critical that you use it wisely to better manage and plan your finances to get through this year when everything is becoming increasingly expensive! In this post, we'll look at some of the best tips for making the most of your year-end bonus.

Clear Your Outstanding Debt

Do you have high-interest debt, such as credit card bills? If the answer is "yes," consider using your bonus to pay them off. Clearing your debts is especially important during times of uncertainty because if you lose income, it might be difficult to repay them and the interest will continue to accumulate.

Even if you only make the minimum payments on your credit card, the principal amount will remain the same. It's like digging yourself into a deep hole and trying to climb out on your own. This can be almost impossible. So, is there a way out?

One way to avoid getting into this situation is to keep your debts under control. Once you take out a loan, make sure to prioritize repaying it. If the pandemic has caused you to rack up unwanted debt on your credit cards, using your year-end bonus to pay it down can be a good way to give yourself some breathing room, build a positive credit history, and stabilize your personal finances. Want to learn more about clearing credit card debt fast? Read this article from us to find out more!

Remember to try to stay on top of your finances afterwards to avoid getting overwhelmed and landing yourself in a sea of debt again.

Use the Year-End Bonus to Grow Your Emergency Fund

If you don't have any debt, congratulations! Now, what can you do with your year-end bonus? One suggestion is to use it to grow your emergency fund.

Many Singaporeans have used and depleted their emergency funds, or reduced them to dangerously low levels, due to the pandemic in the past years. For example, many people used their emergency funds to buy new laptops and upgrade their internet so they could work from home. They may have also needed new home office furniture to avoid working from the couch for long periods. While it's good to have spent the money on necessary items, it's important to replenish your emergency fund in case of future challenges.

Therefore, using your bonus to replenish your emergency fund is a good idea. If you don't already have one, now is the time to start one, and your year-end bonus can be a great way to kickstart it. Keep in mind that this may be only a small portion of what you ultimately need. Aim to gradually grow your emergency fund with a carefully planned saving strategy so it can cover your expenses for 6-12 months. If you can build it up even more, even better!

Buy Health Insurance Cover

The risks and consequences posed by the COVID-19 pandemic were devastating for many Singaporeans, with some even ending up in the hospital in critical condition due to the virus. While we don't want to scare you, the pandemic serves as a real example of how it's important to have insurance coverage for unexpected events that can turn your life upside down, like the financial burden of medical expenses that can come with dealing with the aftermath of a pandemic. Therefore, if you haven't already, using your year-end bonus to buy insurance for you and your family is a great way to protect yourself financially from unforeseen circumstances like these.

Use End-Year Bonus to Clear Your Bills

Just like every year, you will receive regular bills in 2023, and your bonus can be useful for paying them in advance. Why should you do so?:

  • Your bills will be cleared ahead so that you will not have anything to worry about every month

  • Cuts the likelihood of getting penalised for late payment

  • Increases your monthly cash flow

  • More money can be directed to your savings

When you know that all of your household's bills are paid, it will be easier to navigate salary changes and career changes in 2023. The best bills to target are those that have been accrued as part of a contract. Can you imagine going a year without having bills on your table? With proper use of your year-end bonus, it’s possible!

Buy and Stock Up Your Necessities

If you have a lot of mouths to feed and support with daily living expenses and necessities, why not consider using an end-of-year bonus to shoulder this responsibility and make life easier for you financially? Using your year-end bonus in tandem with the release of new CDC vouchers can also help with the cost of groceries and daily necessities, which have become more expensive as a result of the GST increase. Given that many families spend a significant portion of their income on items such as toiletries, groceries, and other household items, it's a good idea to stock up on most of these items during the new year sales and promotions because the prices are usually lower at this time of year.

Buying in bulk is a good way to make the most of your end-of-year bonus. This will allow you to not only maximise the discounts that are currently available during the festive season, but you will also save money on transportation by limiting the number of times you will have to travel to your preferred supermarket! The money you save by making these cost-effective choices will go toward building your emergency fund kit and saving for rainy days.

Use Your Year-End Bonus for Investment

It’s always smart to find ways to generate alternative sources of income, and one way you can do so is to grow your money by investing it. Using your year-end bonus for investment purposes can be a great way to earn some extra cash. The best thing about it is that it won’t when you can, and one great way to do that is to put it to work via investing it – and your year-end bonus is one way can also be invested to generate passive income. It’s a given that you should review each investment outlet carefully before starting to invest despite the many options available!

When you’re ready to take the plunge, feel free to head to invest in the market. We are all aware that investing can be quite time-consuming, and it can be challenging to balance this with a full-time job. One word of advice from us at Lendela is to look into robo-advisory platforms like StashAway, Syfe and Endowus. These robo-advisors can help make investment decisions more of a breeze for you with semi-personalised investment advice plus portfolio management offerings. Just be sure you are well aware of the fees and dangers associated with both using and investing in a robo-advisor!

Alternatively, you can also look into investing in cryptocurrencies if you’re willing to play the long con, despite how dire the market outlook might look now! Here’s a step-by-step from us if you decide to do so.

Repay Part of Your Mortgage

Still got some leftover mortgage loans to pay off? Your year-end bonus can help you with that! It’s unlikely that your year-end bonus will be able to pay off the entire leftover morgage but clearing part of it will help a lot. This in turn will help to not only reduce your monthly payment, but also can be an avenue for you to reduce your monthly repayment so you can clear up that housing loan quicker! Do keep in mind that some mortgages, particularly those provided by HDB, have a minimal fee requirement for mortgage loan partial repayments, with the minimum being 5,000 SGD. If your bonus meets the requirements, feel free to make that decision. If so, you might want to think about taking out a short-term personal loan to temporarily top off your cash reserves so that you can satisfy the minimum requirements.

You could also look to repricing or refinancing your mortgage loan as an alternative, or in conjunction to repaying part of it with your year end bonus.

Make Better Use of Your Year-End Bonus

To sum up, there are many ways you may use your year-end bonus to not only make things easier on you financially but also in other ways! All of the aforementioned strategies are excellent options for using one's year-end bonuses, but if you want to maximise any of them, Lendela is available to assist you in doing so by selecting the best personal loan deal for you.

Lendela is Singapore's leading lender comparison site, and it can help you make loan applications that are simple and quick. So, whether you need a personal loan to cover an emergency expense, fund a home renovation, or purchase a car, Lendela is here to help!