13 Smart Ways to Use Your 13th Month Pay

Christmas is just around the corner and the year is about to unfold. For Filipino employees, ‘tis the season to be jolly as the most-awaited 13th month pay is here. For others, it even reaches up to 15th month. It’s the most wonderful time of the year, indeed! But, before you even plan to squander your Christmas bonus to that latest gadget you’ve laid your eyes on for a year or do a wild Christmas shopping spree or treat your friends to buffet, pause for a while and think about how to best use this year end blessing. This Yuletide season, learn some practical ways on how to spend your 13th month pay to make the most out of your big bucks.

Eliminate your debt

Start the new year with a clean slate by being debt-free — or at least, reduce most of your debts. Debt is one of the major roadblocks towards financial freedom. So if you owe anyone — family, friends, colleagues, credit card companies, etc. — it is now the best time to settle all your dues. You don’t have to pay it in full, but you can use your 13th month pay to significantly reduce your debt. Reducing or eliminating debt will help you start building your emergency fund, savings and allot your money to more important things.

Build an emergency fund

If you don’t have emergency fund yet, now is the good time to start building one. Emergency fund acts as a safety net when crisis strikes. This fund prepares you for unforeseen expenses such as emergency healthcare expenses, accidents, sudden home repair, and even a job loss. Ideally, your emergency fund can shoulder at least 6 months of your living expenses. This will give you enough of a buffer to recover from a financial setback. Remember, it is always best to be ready..

Save money

If you are still undecided on where to allocate your 13th month pay at this point, then maybe you can just save your 13th month pay for now and use it when you are ready. It is better to have it idle for now than to waste it on something unimportant. Think about how to use your 13th month pay wisely by creating smart financial plans.

Set aside funds for future expenses

If you are anticipating some expenses for next year like insurance, real estate tax, tuition fee, home maintenance, etc., then now is the best time to set aside for those expenses as you have extra money. It is best to resolve these expenses sooner than later and taking preventive measures can actually help you save money in the future.

Invest in the future

There are different investments to choose from — unit investment trust fund (UITF), mutual funds, stock market, real estate — to name a few. The type of investment will depend on your risk appetite. Mutual fund is one of the affordable investments available. In mutual funds, a professional fund manager will help you grow your money. UITF, on the other hand, has a same concept as mutual funds but this is usually offered by banks and pooled funds are managed by banks and their fund managers. If you are into a more aggressive investment, they stocks might be the one for you. With just P5,000, you can already start investing in the stock market. But just a caveat, stock market is one of the most volatile investments out there and you must have a basic knowledge before you start.

Before you even start investing in any financial products out there, you must have a basic knowledge and arm yourself with enough information about these investments. Nowadays, there are a lot of books, seminars, internet articles that can help you to be more knowledgeable about investing. It is best to invest in knowledge first before you actually invest your money in any type of financial products.

Invest in items that will help you in the long run.

Getting a gadget or an appliance using your 13th month pay is not wrong. In fact, you can use these items for you to become more productive or can help you earn money on the side. If you are a content writer, blogger, web designer, visual artist, you can invest in a powerful laptop or a top notch smartphone that can help you hone your skills and do some freelance work wherever you are. If you have some love for cooking or baking, you can purchase an oven or some cooking appliance to help you earn extra money by selling food online or through your friends. If you love to take some photos, why not buy a camera or other photography gears which can help you to do some photography gigs.

Buying things is not bad as long as it can help you earn money or develop your skills more.

Invest in yourself

As what Warren Buffett said, the most important investment you can make is in yourself. You are your greatest asset so it definitely makes sense that you spend some of your money for your personal growth and career advancement. There are a lot of ways to do that. You can either buy books to enrich your mind, learn a language, take a certificate course, workshops, attend trainings and seminars, etc. You may not immediately feel the return of investment but this can help you grow, sharpen your skills and add value to your career in the long run.

Start a business

Another way to use your 13th month pay wisely is to start a small business. You can start your own business at a low cost especially with the help of technology and the presence of online marketing nowadays. You can make use of technology and start with a very minimal capital. You can have a buy and sell type of business or bake some cookies and pastries and sell it to your families and friends or sell gift items especially this Christmas — there are a lot of possibilities. Who knows? If you play your cards right, you might eventually find yourself traversing the road to financial freedom.

Give gratitude to your loved ones

As what the lyrics of The Jackson 5 song suggest — “Why don’t you give love on Christmas day. Oh even the man who has everything, would be so happy if you would bring Him love on Christmas day. No greater gift is there than love.”

Yes, why not? Filipinos are family-oriented and Christmas is one of the special occasions to express our gratitude to our loved ones. You can use your 13th month pay to buy gifts to your parents or treat your family to a dinner. Just remember to not spend all your money on this. Pay yourself first and set a budget for this to keep you in check in spending your money wisely.

Reward yourself

There is nothing wrong in treating yourself and spend something for yourself. After all, you have worked hard for the entire year and did a great job so it is now time to reward yourself. You can buy yourself a gift, relax at your favorite spa, or buy that food that you’ve been craving for a long time. Just remember to have a set budget for this and not to spend all your 13th month pay in one go.

Plan for retirement

“Isn’t it too early to prepare for retirement?” you might say. However, it is always best to prepare your retirement as early as possible so when the actual retirement comes, you will be able to live comfortable, happy and not depending on your children.

The sad truth is that, Filipinos are not ready for retirement. According to a 2015 study conducted by The Global Aging Institute and Pru Life UK, 9 in 10 or 90% of Filipino workers “are very anxious about exhausting their savings, being in poor health, and having no one to care for them or being a burden on their children when they retire.” Moreover, the same study shows that only 68% of Filipino workers expect to receive Social Security System or Pag-IBIG Fund benefits when they retire, while 8% expect to receive income from financial assets like insurance, stocks, and bonds.

Retirement age is not a walk in the park so start planning as early as now for you to be a part of that 1 in 10. More importantly, planning for retirement at an early age is the most wonderful Christmas gift you can give to your present and future self as well as your family.

Get a life insurance

Another smart thing that you can do on your 13th month pay is to get yourself a life insurance. A life insurance acts as a safety net which can protect your loved ones in case something happen to you. Take this as a great opportunity to protect yourself and your loved ones from unforeseen circumstance such as disability, accidents, critical illness and dismemberment. There are also other types of insurance you can avail like health insurance, long-term disability coverage, etc. in which you can consider.

Donate to charity

Since the essence of Christmas is about love and giving, this Yuletide season might be the perfect time to share your blessings through your 13th month pay. Giving to charity teaches you to be grateful and appreciate the things you have. You can either donate to a charity close to your heart, a local church or at a cause you strongly support.

Final Thoughts

You have worked hard for the entire year to receive your 13th month pay so it really pays to think carefully and decide on what to do with your bonus. Whatever decision you have made, make sure not to squander it or splurge on instant gratification. Be wise enough to budget it, plan it and share it if you can. The bottom line is to properly manage your money. Always keep in mind that what you do with your money today defines your financial future. Remember to save and invest for the future today so you will be financially successful tomorrow.