A bonus indicates good news for the company's bottom line - and yours! But should you spend, save or invest your bonus - or all three? Career Central looks at ways to make your hard-earned money work (and play) for you.

By JOSHUA RAYAN

You’ve burned the midnight oil to meet deadlines, pitched great ideas and generally proven yourself as a dedicated, pro-active team player. Business has been good and your company has recognised your contributions with a nice bonus. You’re not alone — according to Hewitt Associates’ “Asia-Pacific Salary Increase Survey 2005-2006“, 72% of the 105 Singaporean companies participating awarded fixed bonuses to their staff.

Good news for Singapore and great for you, but what do you do with your bonus once you get it? Blow it all as “mad money”? Pay off debt? Or a combination of the Big Three — spending, saving and investing?

PAY OFF DEBT, PILE UP DOUGH

For those of us who’ve spent our money before we’ve earned it, bonuses give a good chance to pay credit-card bills or loans, reducing the interest owed. Financial consultant Sylvia Rose puts about 30% of her bonus into her housing loan and 40% into investment, savings and insurance.

“That’s because I’m single with fewer expenses and responsibilities,” says 30-something Sylvia. “If people have dependents like children, spouse or parents, I’d say put 20% to 30% towards the highest-interest debt, usually either credit cards or housing loan. Between 30% and 40% should go to investments, savings and insurance, with the balance split between necessities and leisure.

”No debt and not much cash? Then you can use your bonus to kick off or build up an emergency fund. Bonuses are a great opportunity to sock away money without feeling the pinch, and a fixed deposit or savings account gives more interest than a current account.

Remember, you deserve a little reward for your hard work, but you don’t want to blow it all on a couple of gadgets or handbags. So another option is the half-and-half split — spend half your bonus on fun and the other half for debt repayment, saving or investing.

Engineer See Hui Chyr, 29, puts half his bonus into a fixed deposit account, while the other half goes to fun and necessities. “During years when the bonus has been leaner, like half a month, I’ve blown the ‘fun’ portion on a nice dinner with family or friends,” he laughs.

“Bonuses give a great opportunity to splurge on yourself,” says Sylvia, who spends up to 30% of her bonus on leisure. “A new wardrobe or makeover can pay off in boosting your image and confidence. A home makeover can create a healthier and happier living/working space for you.”

So remember the salsa/ yoga/ French class you’ve always wanted but never had time or money for? Now’s the time to indulge! Whether the benefit is physical, spiritual or social, investing in yourself is worth it. Now if you could just find the time…

GET EXPERT ADVICE

Want to make your money work for you, but confused with all the funds and schemes out there? Try talking to a financial planner, who can advise you on what savings programmes and investment options are best for your income and age.

It’s not all about grey hair and rainy days — even if your objective is a major vacation every five years, a financial planner can help you look at ways to save up for that. Even if you’re not in a position to do everything right now, seeing your options and strategies outlined can be helpful towards building your financial security.

Getting input doesn’t mean blindly doing as you’re told, though, says Hui Chyr, who is also pursuing certification as a Chartered Financial Analyst (CFA).

“Many financial consultants are tied to certain financial products, and sometimes their advice is geared towards getting you to invest in their products. Before meeting up, it’s best to educate yourself a bit first so that you can put their advice in context,” he says. “For example, insurance is good, but you don’t need to duplicate yourself with three life insurance policies. Know what fits your lifestyle and what you’re comfortable with.”

INVEST IN YOUR FUTURE

Unit trusts, which (according to Standard & Poors) performed strongly in Singapore in 2005, are easily accessible investment products that generally offer higher returns than bank deposits, and at lower risks than investments in stocks and shares. There are a variety of unit trusts available, so choose those that match your risk appetite and are best able to help you meet your aims.

The stock market is potentially the best place to invest your bonus, but it’s also the riskiest. It’s definitely not for everybody. To minimise risk, you need to understand how it works. You have to do your homework and keep up with economic and corporate developments.

“In fact, I’m studying to be a CFA to understand the stock market better,” says Hui Chyr. “I didn’t want to blindly dump my money with a fund manager or stockbroker and hope they’d do a good job.

”Other options for investment portfolios are property or commodities such as wine, artwork or even watches.

“Every investment has risks, and you should do your homework to avoid getting burnt,” advises Hui Chyr. “If you want to invest in something, pick something you enjoy dealing with, or learning about.

”Property is a major investment that you’re unlikely to buy with just one annual bonus (that’s true for most of us…we think), but it’s worth preparing early for it. Depending on how soon you wish to buy your first home, you’ll need to plan how much of your bonus to start putting aside. Educate yourself on the property market, so that you’ll be mentally prepared for the “grand” moment when you make your first instalment payment...

THREE LITTLE LETTERS… T-A-X

The Inland Revenue Authority of Singapore (IRAS) is just as happy as you are, over your bonus! If you really want to splurge, then figure out how much you’ll need to cover tax on your bonus (if not your whole year), and set that aside, at the very least.

Here’s another good reason to save — IRAS grants full tax exemption to all resident individuals for interest income earned from savings, current or fixed deposit accounts with approved banks and/or licensed finance companies.

GIVE GENEROUSLY

And there’s the final option — charity. Donate your bonus towards worthy causes, which are incidentally tax deductible so long as you are donating to approved Institutions of Public Character (IPC). Shares listed on the Singapore Exchange (SGX) or unit trusts that are readily tradable in Singapore can also be tax-deductible donations.

Don’t assume though — not all registered charities are approved IPCs. Other terms and conditions apply, so check the Inland Revenue Authority website (www.iras.gov.sg) for details.

Well, there are a lot of ways to blow a bonus. Without a proper plan it’s easy to fritter it away without having anything to show for it. Having a clear plan should help give your bonus a stronger and more lasting impact.

Whether you spend, save, invest or clear debts, here’s to a bonus that packs a punch in helping you achieve what you want!