Why does your annual bonus now feel like small change?
The magic moment has arrived: your annual bonus is now in your bank account. You open it like you would open a present at Christmas, but why do you feel that you got coal instead of a shiny gift?
Your bonus arrived, but as you sit with your holiday budget, the numbers do not seem to add up. Why does it look like you will suddenly have a lot less to see you through to January payday despite getting your standard inflationary increase of 6% earlier in the year?
You are not imagining it, says Boipelo Ndimande, chief financial officer at Consult by Momentum.
“There are a couple of factors at play affecting your take-home pay and it is important to understand what they are so that you can make a plan to see you comfortably through the holidays.”
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Why your bonus feels like small change
Ndimande says there are various reasons why your bonus suddenly seems a whole lot smaller:
- Tax bracket creep: Because the finance minister did not adjust income-tax brackets for inflation at this year’s budget speech, any increase you received pushes more of your earnings into a higher tax bracket that was not adjusted alongside inflation. Therefore, while it might look like you are earning more on paper, you are quietly squeezed. Bonuses are also taxed at a higher marginal rate, leaving your take-home pay packet feeling noticeably lighter.
- Lifestyle creep: Subscriptions, takeaways, upgrades and convenience spending have a way of stacking up quietly. By December, your monthly budget is already tighter, meaning your bonus has more gaps to fill.
- Inflation: For many of us, living costs increased faster than our pay, meaning that our bonus now buys less than it did a few years ago. What once covered the season comfortably now barely fills the basics. Thanks to three years of elevated food inflation, often in the double digits, a family that used to spend R1 200 on a Christmas lunch will likely now spend more than R1 800.
- The annual knock: Year-end and new year often bring sneaky extra costs, such as licence renewals, medical aid increases, school deposits, insurance bumps and back-to-school costs. These once-off expenses often land at the same time as your bonus, swallowing a chunk before you even had a chance to budget.
“People remember how far their bonus stretched a few years ago, but in real terms, thanks to inflation, tax and cost of living increases, a R20 000 bonus is worth far less today than R20 000 in 2019.”
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While there is not much you can do about these factors, what is in your control is your budget, Ndimande says. She shares these simple ways to adjust and ensure you avoid the dreaded Januworry.
Review your festive budget
“Before you even touch your bonus, take an honest look at what December realistically costs you now, not what it cost three years ago,” Ndimande says.
Prices for food, petrol, gifts, travel and holiday childcare all increased well above inflation, which means your old budget simply does not work anymore. Map out what you must spend and what you want to spend, then decide where you can cut back, she says.
“A refreshed, realistic festive budget can instantly show you where your money is leaking and help you regain control.”
Split your bonus wisely
The most effective strategy is to divide your bonus the moment it arrives: one portion for essential December and early-January expenses, another for savings or debt reduction and a final slice for guilt-free festive fun.
“This way, your priority bills are covered first and you avoid the all-too-common trap of using your entire bonus in December, only to face pressure when debit orders hit in the new year.
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See where you can save or cut back
You can stretch your bonus much further by making small and intentional shifts, Ndimande says. “Creative gift-giving, like pooling funds for one family charity donation instead of exchanging multiple presents, can cut costs without cutting joy.
“Simplifying festive meals, sharing hosting duties, or choosing a more low-key potluck-style Christmas lunch can also ease the financial load.”
She says where possible, avoid the “all at once” shock by buying gifts and back-to-school supplies earlier in the year or during Black Friday sales. And if you are genuinely stuck, speak to your credit providers about a temporary payment holiday on your premiums (but use this as a last resort).
