Have you received your 13th month pay yet? If you are employed, you’re most likely entitled to receive your 13th month bonus on or before December 24th as this is mandated by Philippine government. Most Filipinos are so excited to receive this pay (I am too!) as well as the Christmas bonus, because indeed, these make our Christmas even merrier.
Where do you plan to use your bonus?
Do you remember where your 13th month pay last year go? If it was gone too quick and too soon last year, you may want to change that habit this year and instead plan for where your money will goto make the most out of your bonus. It is your hard-earned money too, you may want to make it last longer and grow, right?
Here are 13 wise ways or options where you can use your bonuses:
1. Pay off debts and bills
If you have read How to Build a Stable Financial Plan, top 3 listed on the priorities should be to eliminate debts. There are good debts (intended for business or investments) and bad debts (such as credit card debts used for personal wants and small purchases). Bad debts are costing us interests and when you leave it unpaid, compounded interests will also accumulate. From your 13th month pay, I highly suggest that you pay off the debt which is costing you the highest interest so you can be free from losing more money for the next months to come.
2. Establish your emergency fund
If you haven’t saved 3-6 month-worth of your income yet, with your 13thmonth bonus, you can finally start or fulfill your emergency fund goals. The purpose of the fund is to deal with sudden changes in our job or business and to pay for any unforeseen events. To learn more about emergency fund and how to build it, read 10 Tips to Build Your Emergency Fund Fast
3. Buy a Life Insurance Policy
Life insurance is a guaranteed income loss replacement tool. If you have dependents on your income, you might want to consider to protect your income by purchasing a life insurance policy to protect also your family.
Your 13th month pay is more than enough to help you get insured, because contrary to what many people think, life insurance policy is actually cheap (term life insurance). For example, Php 500k coverage costs only Php 4,090 of premium in a year for a 25 year old, female, non-smoker.
4. Buy a VUL Policy
VUL or Variable Universal Life Insurance is an investment-linked insurance plan. When you buy one, you can get the benefits of both life insurance and investment in mutual funds. It’s like hitting two birds with one stone. The minimum initial premium for a VUL is quarterly mode. For as low as Php 4,500 (Php 1,500 per month), you can get yourself insured with maximum coverage of Php 500k plus investment. The premium rate still depends on your profile (health conditions, occupation, etc.).
5. Open a Savings or Time Deposit Account
Although bank savings account offers very low interest rates, it is still a safe place to keep your money. It is good to save your emergency fund or travel fund in a savings account which you can easily access without any charges.
You can also consider opening a time deposit account which offers a higher interest compared to savings account but has a specified date of maturity, before which you cannot withdraw your funds.
6. Invest in Stocks
Investment in stocks are high risk, high return type of investment which can help you potentially grow your money higher rather than other investment vehicles. The easiest way to start is to open an online account from a brokerage firm such as COL Financial. The minimum investment for a COL starter is only Php 5,000 and this is also the amount you’ll use to purchase individual stocks. To learn more, read How to Open a COL Account and Start Investing in Stocks.
7. Invest in Bonds (RTBs)
A bond is a debt security in which pays fixed interest rates until maturity. This investment is in a form of a loan to company or government. It is less risky than stocks but offers higher returns than time deposits.
Retail Treasury Bonds are one of the investments that are virtually risk-free, meaning, your principal payment is guaranteed safe because RTBs are direct and unconditional obligations of the Philippine government. But since the risk is so low, the potential return is also lower (e.g. 4.625% in a year). RTBs are issued by Bureau of Treasury but you can invest thru major banks.
8. Invest in Mutual Funds or UITFs
Investing in pooled funds allows an investor to take advantage of fund managers’ experience and expertise. When you invest in MFs or UITFs, you only need to choose a fund (equity, index, balanced, bonds or money market), which is already invested in many different securities. For as low as Php5,000 you can open an account from any major asset management company (for MFs) or banks (UITFS) and get the advantage of having a diversified portfolio. They are also best to help you build fund for medium to long term goals.
To learn about the difference between MFs and UITFs, read Investing 101: Mutual Funds vs. UITFs
9. Get a Healthcare Plan
You may already have PhilHealth or HMO card as part of your company benefit, however, we have to face the truth that their coverage is very limited. Getting health protection for you and your family can save you from financial disaster when you suddenly get medical emergencies.
10. Start-up a Business
If you have been wanting to start a small business, you can go ahead and use your bonus as capital for a sari-sari store, a food stall or an online business that interests you. Any extra income can help you build your wealth. Don’t worry about starting small, as you can always add more capital in the future as your business grows.
11. Invest in Knowledge
You are your greatest asset so it makes sense to improve yourself by investing in knowledge. You can do this by attending seminars and trainings or buying books to enrich your mind and gain new knowledge. When you improve your skills, you also gain opportunities for career advancement or a side business.
12. Reward yourself
Have something to reward yourself this Christmas. You have worked so hard during the year to provide for your loved ones, give yourself something you have been wanting for quite some time. It could be a short vacation, an hour of massage or spa, a gadget, or bag which doesn’t necessarily need to cost much. You don’t need to use up all of your 13th month pay and bonus as you can allocate enough such as 10% of your pay for a nice treat.
13. Share Your Blessings
It’s Christmas time and it’s the season of giving. Aside from giving gifts to own family, most people ought to be extra helpful to the sick, poor or homeless by giving alms or donating gifts to charity, or through church or NGOs. You may do this too – bless others by sharing the blessings that you received. It may not yield any tangible returns or cash back, but it does give you the emotional rewards. You’ll feel even more grateful and blessed.