How to spend (and save) your year-end bonus and still reward yourself
Every year, Filipinos look forward to receiving their 13th month pay. 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 ideas on how to spend 13th month pay wisely:
- Pay off your debts.
- Save and build 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 insurance.
- Invest and grow your money for your early retirement.
Around the time the “ber” months roll in, most Filipinos start making rough plans on how to spend their year-end pay. Often dubbed as a Christmas bonus or 13th-month pay, people use this extra cash to splurge on a new gadget or a big-ticket item. While these splurges offer temporary happiness, you’ll be better off investing your 13th month pay.
The question is: where to invest your year-end bonus?
If you're looking to make your hard-earned money work even harder for you, you can start by following these simple personal finance tips.
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.
How to spend year-end bonus wisely
Even though it feels like a major sacrifice at the moment, try to think of investing your year-end bonus as a gift to your future self. Here are smart ways to invest your 13th month pay:
The gift of relief: Clear your debts
One way to spend your bonus is to pay off your debts first to make managing debt easier for the coming year. Debts come with interest, and or bills paid late incur penalty charges. Not being able to manage your debt can result in higher interests and penalty charges, which will make it harder to pay it off.
Being free from debt will also free up your income so you can save up or invest in other goals, such as building an emergency fund.
The gift of preparedness: (Re)build your emergency fund
Once your debt situation is under control, consider starting an emergency fund.
An emergency fund should be worth three to six months of your monthly income. It can be used as a source of funds if you lose your job, get hospitalized, or when an emergency situation requires you to spend more than what you have budgeted for the month.
You can use a portion of your bonus to get your emergency fund started. Or, if you have one that you’ve dipped in recently, you could use your bonus to replenish your funds.
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
If you’re free of debt and 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.
You can invest your 13th month pay as a downpayment for a vehicle that will make transportation more comfortable for the entire family. A larger downpayment would make your monthly installments more manageable, so it doesn’t hurt your daily budget.
You can pair this strategy with a Metrobank credit card for purchasing appliances and other similar purchases. You can put down a downpayment or cover a part of the cost in cash. Then, take advantage of 0% installment promos and discounts to keep your monthly payments manageable.
Using your credit card means you’re creating debt. However, if you’re using it to improve your quality of life and are keeping it under control, you don’t have to worry about incurring higher interest and penalty charges, as long as you are able to pay off your debt on time, and if you can, in full.
The gift of protection: Securing yourself and your loved ones
If you’re the breadwinner in the family, then one of the most selfless things you can do is invest your 13th-month pay in insurance for your loved ones. Insurance offers peace of mind, so you and your loved ones 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 caters to different financial needs and goals.
Make sure that your Christmas bonus goes toward an insurance plan that offers the type of financial protection your family needs.
The gift of relaxation: Investing for retirement
Your paycheck likely goes toward multiple goals like a wedding, a house, a car, or your travel funds. Many professionals neglect to prepare for retirement.
When we talk about preparing for retirement, we don’t mean simple life savings. The best way to ensure you have sufficient money to cover all your expenses after you retire is investing for retirement.
Investments make sure that your money grows, allowing you to build wealth over time.
Then, you’ll have funds to support your lifestyle when you retire. If you struggle to find the funds to start your retirement savings, you now know how to spend your year-end pay wisely.
The gift of growth: Investing for bigger goals
If you’re not worrying about bad debt, building an emergency fund, or setting aside money to help protect yourself and your family, then consider investing your year-end pay.
You can invest with different goals in mind, such as growing your assets for the next generation or investing for retirement.
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.
One smart investment is Unit investment trust funds (UITFs) and fixed-income investments, which allow you to have access to money experts and an institution that will guide you in making sound decisions. Metrobank is among these financial institutions that offer 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.
How are you spending your 13th Month Pay this year?
These are just some ideas on where to invest your year-end pay so that it helps you achieve your goals and improve your life. While it’s not a bad idea to treat yourself every now and then – after all you’ve worked hard for that money – don’t lost sight of your goals. Don’t forget that Metrobank is here to guide you.
