I’ve received extra money (lai see/bonus/salary increase)! What’s the best way to use it?

The possibility of receiving extra money, for example a bonus or lai see is certainly one to look forward to! This is a good opportunity for you to grow your savings, add to certain funds that you have budgeted for, or make an important payment. But as much as we want to make sure our hard-earned money is being saved, it is important that we also don’t feel deprived.

Whenever you receive any extra money, your options are always to either spend it, save it or invest it. Let’s explore each one!

Spend it: Spending this money immediately won’t make it last very long, but it could go towards an essential cost. If you have any outstanding debts to pay, prioritise paying off your debts first with this money and reward yourself to freedom from these debts. It could also cover several smaller but necessary expenses like the service fee for your mobile phone or remittance cable charge costs for when you send money home.

Save it: Could you save this money for your long-term goals, such as your children’s education or a large purchase for your home? It could also go towards an emergency fund - it is crucial to have an emergency fund, especially so you can bounce back during a financial crisis (e.g. if you lose your job, or have urgent medical needs).

Invest it: While you put off spending it, why not make the additional money work for you by investing it? Research and carefully consider investment options available. You could also consider investing it in something that could pay off for you or your family’s future, such as in upgrading your existing business or in your own education/skills-training. If you’ve received a monthly salary increase, as opposed to a one-off bonus, investing the extra income could allow you to gain the most out of your earnings (if you’re not in urgent need of spending it). For example, if you put HK$100 per month into an investment instrument with an interest of 6% per year, it could potentially yield over HK$7000 in five years with compound interest.

Don’t forget, try to resist the temptation to indulge in expensive restaurant meals, treats, and sales on your days off - otherwise you’re just spending your extra money in other ways!

Also, remember that although you may receive a good amount of money from lai see or bonuses in some years, that might not always be the case. In times when there is an economic crisis or recession (for example, during the Covid-19 pandemic), you may receive less - if you’ve been ear-marking this money towards a certain goal, make sure you have a back up plan.