AMONG the many things that remind us that Christmas is around the corner, perhaps one of the most anticipated is the reflection of 13th month pay in employees’ payroll accounts.
We really look forward to it that even before its giving, most of us already know how it will be spent. It is fair to assume that this bonus is of great help to us, especially during this time of pandemic. But whether there is pandemic or none, we need to be able to properly allocate our 13th month pays to take advantage of it and enhance our financial well-being.
There could be a number of reasons as to why we feel at times that our 13th-month pay tend to just slide through our hands and realize we have spent much of it when it is a bit too late.
One reason for this is that this money is credited to our accounts in a lump sum manner and there’s an intense temptation of pinching a small amount from it to buy something here and there. Another possible reason is the “easy come, easy go” tendency with this money. This may be due to the illusion that we did not work hard for it since this is separate from our regular monthly salary wherein one can apparently feel the hardships of making money to a larger extent.
Emotions play an important role in this as well as we do not put much attention when it comes to spending money since Christmas season is generally a festive period of the year. And it is easy to get lost in the gyrations of sales and discounts not only in malls but also in online stores as well.
An essential step to effective managing and handling the 13th month pay is to change how we view it as we tend to think that this is money is free just from the name itself. However, we can change this perspective such that we will think that we still worked for it.
We can think of 13th month pay as the salary we get for working 1,960 hours in a year (40 hours a week by 49 weeks). If, for example, one earns P30,000 a month, imagine that the 13th month pay is something like working for a year to get that P30,000. Framing it as something we worked hard for than free money or bonus will make us more aware of how we spend it.
A household can use a portion of the 13th month pay as means to decrease liabilities or debts say, for example, personal loans or mortgages (payment of principal). If the household has manageable debts, the 13th month pay can be used to secure additional insurance coverage in the form of cheap term insurance especially when the coverage of existing policies are insufficient to provide for the insurance needs of the household. Another use for it would be as source of additional savings (emergency funds) or investments.
Can we use our 13th month pay to buy gifts not only for ourselves but for others? Of course! Many people say giving is one of the spirits of Christmas and rightfully so. The important thing to remember is that buying gifts should be within the means and that obligations are not forgotten in doing so. It is highly recommended to consult with a financial planner to have a fuller picture of how 13th month pay fits with the financial situation of the household.
When the 13th month is deposited into your account, ask yourself this question: “How can I use this hard-earned money to improve my financial situation and then give happiness to others?”
John Hero Salvador is a registered financial planner of RFP Philippines. To learn more about investment planning, attend the 99th batch of the RFP program on January 2023. To register, e-mail firstname.lastname@example.org or send a text message to 0917-6248110.