Money and insurance

7 smart ways to spend your 13th-month bonus

Use this extra money effectively to make the coming year (and years to come) more financially secure.

FWD Life Philippines

The month of December brings joy, reunions, a lot of expenses and the much-awaited 13th-month bonus for Filipino workers. By law, employees should receive their bonus by Dec. 24 of each year. Some employers pay it lump sum while others do it in two installments, usually mid-year (June) and end of the year (December).

So what will you do with your bonus? What should you do? How about not spending it on a new watch or smartphone or gifts—and instead use it in effective ways to make the coming year (and years to come) a more financially comfortable one.

Here are 7 smart ways you can use your 13th-month pay.

  1. Use it to pay off bad debt.

Use it all or a portion of it to pay off your credit card debt as the interest can stack up and hurt your financial wellbeing. Credit cards in the Philippines charge anywhere from 1 to 2% a month, which can go as high as 24% annually. Ideally, you should be paying the entire amount due every month, not just the minimum amount. Better yet, watch your spending for the entire year so you don’t rack up high credit card bills.

  1. Use it to increase your emergency fund.

While the rule of thumb is to have at least three to six months’ worth of emergency funds, financial guru Suze Orman now says it should be eight. This was a lesson we all learned from the pandemic—that situations can happen any time like a death in the family, or our ability to earn is suddenly cut, or someone requires hospitalization. An emergency fund cushions us against life’s curveballs.

  1. Use it toward big life goals.

Goals require planning—and money. Is buying a house, a new car or traveling abroad on your list? Are the kids going to college soon? You may feel that because your 13th-month pay is extra money, you can spend it on yourself or on non-essentials since you’ve been saving in the past 12 months anyway. But think of the future—you’re actually saving yourself a bigger “sacrifice” once your deadline for these goals gets nearer. Do it now rather than stress about a lumpsum payment in the coming years (like for a down payment on a house).

  1. Use it to buy health/life insurance.

Like Suze Orman who changed her mind about how big an emergency fund should be after the pandemic, we’ve realized that life can go south in a snap. We may get sick or get into a debilitating accident or suddenly pass away. A health insurance like FWD Life Insurance’s Vibrant protects you from wellness to treatment and recovery. You’re covered before anything happens up to after everything happens. FWD Manifest, meanwhile, gives you both life protection and an investment opportunity based on your appetite risk because it lets you invest in stocks or bonds or both.

  1. Use it to boost your retirement savings.

If you’ve not been diligently saving money for your retirement, use your year-end bonus to boost your retirement fund. If you’re a young worker, consider yourself lucky that you can start early and enjoy life when you’re at your professional peak.

  1. Use it to invest in yourself.

If you’ve always wanted to take your master’s degree or a get an online certification for a new skill to be more competitive in the job market, use your bonus to enroll. This can go a long way to upskill or for you to acquire new skills.

  1. Use it to start investing.

If your bonus is sizable, it could serve as capital to start a business or you can put it in the stock market and let the experts manage it. Consider getting an investment-linked insurance such as FWD’s US Dollar/Peso Nitro and Velocity Global Payout Funds, available with All Set Higher, which is managed by fund experts and you get protection and payouts in the currency you choose to invest in.

Book a free session with an FWD financial advisor to learn how your bonus can be used to help achieve your financial goals.