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With your 13th-month bonus around the corner or even already here, you might have plans for that money. If you don’t have one yet (or even if you do), here are some smart options to make the most of it.
Option 1: Free yourself
If you have debt, then you should use the additional money to pay it. Remember, the longer it takes for you to pay off the amount you owe, the more you end up spending on it (because of the interest). If you have multiple debts, it would be best to pay off those with the highest interest rates first.
If you currently have a loan or purchased something on installment, you have 2 choices. First, if you don’t have trouble with the amortization, you can use your bonus to bulk up your emergency fund or investing.
Second, if you’ve been finding it hard to make those payments, you can set your bonus aside and use it to pay every month.
Option 2: Be ready for the unknown
If you’re debt-free, become worry-free too by using your bonus to start, complete or add to your emergency fund. Simply put, this is money that you set aside for when life throws us curveballs. Unforeseen events such as sudden job loss or unexpected expenses.
The amount you need is 3 to 6 months’ worth of your essential monthly expenses, like basic food, transportation and communication.
One thing to remember: don’t put too much in your emergency fund. Because this is best kept where it can easily be accessed if needed, it likely won’t be earning you much in terms of interest or asset appreciation. Instead, use the money to earn more money for you.
Option 3: Prepare for the future
If you don’t owe anything and your emergency fund is complete, then consider putting your bonus into an investment. That way, your money may earn more than if it was in a regular savings account, and it’ll help you prepare for the future.
Remember though, there are always risks to investing and there is nothing guaranteed. The exact type of investment that you choose should fit your risk profile and goal. You should also add to the investment whenever you can afford to, because investing should be a lifestyle and not a one-time deal.
If you already have an investment, consider making a new one to diversify your portfolio. That way, you can reduce the chances of loss in case something bad affects a company or industry that you’ve put your money in.
Bonus option: Treat yourself (a little)
Whatever else you do with your 13th-month pay, make sure to leave a little for yourself.
Having the discipline and willpower to not splurge when you have money can be tiring. Giving yourself a treat when you get a bonus can help you stay the course for a better future. Make sure not to spend too much (try not to go past 10%) on it, though.
Of course, this only applies to additional money that comes in. For your regular income, follow the budget that you’ve set so you can make the best use of your funds.
