13th Month’s Pay. We have a lot to be happy about as December approaches.
We are currently discussing year-end gatherings, family gatherings, family holidays away from the city or even abroad, get-togethers with old acquaintances, and other exciting events with friends and coworkers.
The 13th month’s pay, which is a required benefit for anyone who has worked for more than a month, is what we are most looking forward to.
Do we make smart use of our 13th month’s pay? Is it set aside for money to help us better our finances, or do we simply spend it on new things as most people do?
Here are some practical ways to spend our 13th month’s salary. Our financial situation will significantly improve if we implement one or more of these, especially in the upcoming year.
Depending on your preferences, we can either spend the entire sum or simply a predetermined portion.
1. Settle Your Debts
Paying off debts, including personal, credit card, and bank loans is one of the finest uses of your 13th month’s earnings.
Our personal loans from family, friends, and coworkers should be paid back as soon as possible.
They were there to assist us when we required money immediately for whatever occasion. So it only seems sensible that we would pay them back since we already have the money. If we owe someone money, we should pay them off before purchasing new items or gadgets.
In addition to personal loans, we can use our 13th month’s earnings to pay off our credit card debt. We are squandering a lot of money on interest if we simply carry over our total monthly obligation from one month to the next. Instead, we should use that cash for more crucial things.
For instance, let’s say that you only make the minimum payment on your credit cards, which has a debt of Php 50,000. If you pay 3 percent interest, you will lose 1,500 pesos per month.
By the way, most credit card issuers charge between 3.25 percent and 3.5 percent, so that figure is conservative. In that case, you can already set aside card interest for your emergency fund.
2. Build your emergency reserve with your 13th month’s income.
A reserve fund is necessary for everyone. It is a sum of money that we often set aside in a bank for unforeseen expenses or emergencies. It serves as a cushion and safety net for our finances, making money available when we need it.
By having an emergency fund, we can avoid borrowing money from others or selling our investments.
A minimal emergency fund is equal to three months’ worth of spending. It will take some time to establish this fund if we merely devote a tiny portion of our income to it. For instance, you may have discovered after keeping track of your spending that you spend 90% of your income on necessities.
This implies that you can only set aside 10% for creating an emergency fund. Therefore, it will take about 9 to 10 months to accumulate an emergency fund large enough to cover one month’s expenses. Your money can be placed in an online savings account with a company like GCash GSave, DiskarTech, or CIMB.
We could easily accumulate a month’s worth of funds if we set aside the entire 13th month’s wages for an emergency fund. This might improve our spirits and help us get started on saving more money for it. However, if we set aside half of our 13th month’s income for the emergency fund, it already equals the equivalent of one-half of a month’s worth of this money. That is a vast improvement over the previous illustration (10 percent monthly).
3. Put money aside for your child’s schooling.
I went to my first cooperative general assembly a number of years ago. Stickers bearing a value—the share capital of a cooperative member—were provided to have adhered to our shirts. If I recall correctly, I only had more than Php 5,000. Some members, particularly the older ones, had sums that were close to six figures.
I enquired of a person I know how he acquired that much. By the way, since they are unable to withdraw while being a member of the cooperative, members typically simply deposit the minimum share capital. He claimed that he borrows money from the cooperative for his children’s tuition every year around enrollment time. A portion of each loan that a member receives is deposited as share capital. Imagine how long he had been taking out and repaying student loans because his children had already started college.
4. Invest the 13th month’s salary.
Investing in financial products like UITF, mutual funds, or stocks is another smart method to spend your 13th-month earnings. A portion of your 13th-month pay can be a smart place to start if you don’t already have any investments. Today, the minimum investment is 1,000 Philippine Pesos. These investments are highly accessible and very simple to open. For instance, a COL Financial account may be opened for a little Php 1,000, and investing is done online.
Before you begin investing, keep in mind that it is risky and you could lose all of your money or a portion of it. Decide how much you can afford to lose before investing. You ought to have a sizeable emergency reserve as a safety net.
5. Starting a Small Business
A percentage of your 13th month’s compensation can be used to launch a small business. You could, for instance, start an internet store. Please be aware, though, that this requires some planning, and there’s a chance we could lose money if the enterprise fails.
I used to think of my 13th month’s income as just a bonus that I should use as compensation for my hard work during the entire year, like the majority of individuals.
“After working persistently for many months, I have to get something new,” was the mantra I lived by at the time. I’ve earned it. “I purchased new clothing, equipment, or other items.
I guess it was the old me. I now see the 13th-month pay as a tool for reaching my financial goals rather than just buying something new.
A mentality change is necessary in our contemporary world. We are surrounded by a variety of communication channels that encourage buying.