Christmas is just around the corner and the year is about to end. You know what that means – 13th month pay is here! But before you run off to the mall on a wild shopping spree, treat your friends to a year-end buffet, or make that one major purchase, step on those spending brakes and pause. Think for a while about the best use for this year end blessing.
Here are 7 ways to use your 13th month pay and other year-end bonuses:
1. Pay your debts.
If you owe anyone—friends, family, co-workers, the credit card company—anything, it’s best to pay up first. Debt is the enemy of financial freedom. Getting rid of those tension headaches that you get from worrying about your financial obligations is one of the best gifts you can give yourself. Start the new year with a clean slate: debt-free. Or at least, reduce your debts in a major way. Work towards paying off your debts before spending on anything.
2. Set aside funds for anticipated expenses for the coming year.
These are expenses like tuition fees for the next school year, income tax, realty tax, and insurance. Instead of wondering where you would get the money for these predictable expenses, do something about it now.
3. Set aside an emergency fund.
Having funds to use is critical in times of emergency, especially if you do not have a health card or HMO (health maintenance organization). And even if you do, minor operations, accidents, and major illnesses that may not be covered by your HMO can easily drain your funds. Aside from medical emergencies, unexpected charges, fees, tax increases, and family needs, would need to be funded outside of your family’s regular monthly expenses so as not to disrupt your cash flow. If you do not have one yet, now is a good time to seed your emergency fund with your 13th month pay.
4. Invest in yourself and your loved ones.
I’m a big believer in creating moments and memories with your family. If you still have something extra after you’ve paid your obligations, set aside money for anticipated expenses, and have a healthy amount stashed away for emergencies, then invest in your family and in yourself. Treat your family to that long overdue vacation you promised them. Buy that gift for your loved one that you feel would truly be helpful to them. Upgrade your tools of the trade (cellphone or laptop), which will boost your effectiveness at work. Attend a seminar that will help boost your career.
5. Invest in the future—both your immediate and distant future, that is.
Right now, you can start changing your future by adjusting your lifestyle. If you can minimize or even do away with the little luxuries you allow yourself daily, such as eating out and making unnecessary purchases, perhaps you can channel your funds towards more beneficial and lasting investments, such as a car or even a home. Just make sure that you can realistically fulfill your monthly payments.
It is never too early to think about the distant future. Build your retirement fund or endowment fund. If you have not yet invested in insurance, now could be a good time for both you and your family.
To help fund your future, invest! There are different investments to choose from, and professional fund managers can help you get started. Mutual funds are among the affordable ones. The UITF, or unit investment trust fund, on the other hand, is a collective investment scheme banks offer. Pooled funds are managed by banks and their fund managers. If you want a more aggressive investment, you might want to consider investing in stocks, although stocks are more volatile. Arm yourself with enough information about these investments. Nowadays, books and seminars abound to help us become more knowledgeable about investing.
6. Start a business.
A small capital can go a long way when starting a business, especially with online marketing nowadays. Build this business on the side. Who knows? As you find growing success in entrepreneurship, you might eventually find yourself moving on from employment.
7. Save, save, save!
If you still have not yet decided on how to use your 13th month pay and other bonuses from the suggestions given, then set it aside first as you contemplate on how you would use it. But remember that you are freer to choose from these recommendations if you are free of debts—so start there.
When you make wise decisions on how to spend your 13th month pay, you’ll face 2019 with confidence on the way to a better, brighter new year!
Boris Joaquin is the Editor-in-Chief of Workwise Asia. He is also a corporate trainer, executive coach and consultant, and is president and co-founder of Breakthrough Leadership Management Consultancy. He is one of the few registered Investors in People Specialist in the country. He is married to FamilyWise Asia Editor-in-Chief Michelle Joaquin and they have two daughters, Ysobel and Julia.