How to spend (and save) your year-end bonus and still reward yourself
The year 2020 offered life lessons, including some important ones on money. While it is tempting to start splurging on a new gadget or a holiday sale, consider using this well-deserved year-end bonus on things that matter. Here are some options you can consider:
- Pay off your bad debts.
- Build or rebuild an emergency fund.
- Set aside some money to upgrade your lifestyle. A downpayment for a car loan, perhaps?
- For your peace of mind, invest in health insurance.
- Set aside some money to invest and grow your money for the future expenses.
Every year-end, you often make rough plans on how to spend your year-end pay. Often dubbed as a Christmas bonus or 13th-month pay, this money ends up as extra cash for getting that new gadget or a big ticket item that only that much cash can buy.
However, this 2020, you have dealt with the COVID-19 pandemic. Spending all that extra cash seems tempting. But you have to consider that the economy is reeling, and that there are more meaningful ways to spend it–or even save–for things that matter or are important.
If you're among the hardworking ones getting a bonus at this time of the year, consider where to spend this money. You can start by following these simple money basics.
The gift of relief: Clear your bad debts
One way to spend your bonus is to pay off your bad debts first. These debts are those that come with high interest or bills with incurring penalty charges. If you’re unable to clear these bad debts, paying them off now can keep the interest and charges from increasing too fast.
Being free from bad debts also saves you from constantly worrying about interest and financial charges eating away at your income, which you can use to build an emergency fund, for example.
The gift of preparedness: (Re)build your emergency fund
Once your debt situation is under control, consider building an emergency fund.
An emergency fund is 3 to 6 months’ worth of your monthly income, so you can use a portion of your bonus to get you started. If you have an emergency fund but you had to dip into it for an emergency, then this is a good time to replenish it.
An emergency fund is useful when you lose a job; you’re hospitalized for a medical condition; or you face an emergency situation that requires you to spend more than what you have budgeted for the month.
Ideally, you keep an emergency fund accessible through a bank account. Having cash on-hand is okay but is risky, even if you’re just going to keep it at home. When it’s in a bank account, you can readily withdraw it anytime from an ATM. For example, Metrobank has over 2,300 ATMs all over the country.
If you’re able to enroll your bank account to Metrobank Online, you can easily monitor your emergency fund balance and see your progress.
The gift of progress: Improving your quality of life
Now that you’re free of bad debt and you have an emergency fund set aside, you can consider using the 13th-month bonus to make a major purchase (or use it as a downpayment) that helps you improve your lifestyle.
This extra cash will allow you to make big ticket purchases that you can later pay back in manageable installments. With a Metrobank credit card, for example, you can take advantage of 0% installment promos and discounts to buy things you want without having to shell out a huge sum.
Using your credit card means you’re creating debt. However, you can keep it under control as long as you pay this debt on time and in full to avoid incurring higher interests and penalty charges.
Alternatively, not all big-item spending needs to be material.
The gift of protection: Securing yourself and your loved ones
If you’re the breadwinner, then one of the most selfless things you can do is to invest your 13th-month pay in insurance for your family, so that they don’t have to worry about money, should something happen to you.
If you’re going to buy insurance, you should put your hard-earned money in an institution that prioritizes your family’s best interest. AXA Philippines offers both health and life insurance that are designed based on what type of financial protection you and your family needs.
The gift of growth: Investing for bigger goals
If you’re not worrying about bad debts, building an emergency fund, and setting aside money to help protect yourself and your family, then consider investing your money.
When you invest, you put money that you could have otherwise spent in a financial vehicle that can grow. Depending on the type of investment you’re making, an investment comes with returns but with inherent risk as well.
Unit investment trust funds (UITFs), for example, allow you to have access to money experts and an institution that will help guide you in making sound decisions.
Metrobank is among these financial institutions that offers UITFs based on different levels of risk. You never have to invest in something that you’re not comfortable with.
If you want to invest your 13th-month pay in a UITF, you can download the Earnest app (available on Google Play Store and Apple App Store). The app will let you find the UITFs for you (which is based on a risk assessment), and start investing in them.
All you have to do is open a Metrobank savings account, and link it to Earnest. If you don’t have a Metrobank savings account yet, you can open one on the Earnest app. No need to go to a branch at all.
Visit the Earnest website and learn about investing, the risks involved, and how to make all of it work for you.
Some ideas you can start with
These are just some ideas on how you can spend your year-end bonus this year. The best one depends on how you’re doing financially.
To learn more about how to tackle your finances and how to best make use of your money, check out our other articles on money basics.
The year 2020 has been a trying year for everyone. With the end of the year within sight, let’s all take these life lessons learned in the years to come make them meaningful.
This article is part of a collection of stories and practical financial tips that are published to help people learn from the experiences of others, and to pick out lessons on personal finance and sound money habits beyond the pandemic.
