5 Things to do with your 13th month pay
By Randell Tiongson on October 31st, 2024
Receiving a 13th month pay is a significant opportunity for many employees. It’s a welcome addition to end-of-year finances, providing an opportunity to manage money wisely. Instead of spending it all on gifts and celebrations, here are five smart ways to allocate your 13th month pay to set yourself up for a financially sound future:
1. Pay Down Debt
Debt repayment is one of the most effective uses of any windfall, including your 13th month pay. High-interest debts, especially credit card balances, can drain your finances over time if left unchecked. By paying off or reducing these balances, you’ll be saving money in interest, improving your credit score, and relieving yourself of financial stress. The Bible reminds us in Proverbs 22:7, “The borrower is the slave of the lender,” so freeing yourself from debt can lead to greater financial freedom.
Pro Tip: Start by paying off debts with the highest interest rates first. If you have multiple debts, consider the debt avalanche method (paying off high-interest debt first) or the debt snowball method (paying off smaller debts first for motivational momentum).
2. Set Aside for Tithing or Charitable Giving
If tithing or charitable giving is part of your financial routine, consider setting aside a portion of your 13th month pay for this purpose. Giving is not only a way to express gratitude for your blessings, but it also cultivates a spirit of generosity. In 2 Corinthians 9:7, it says, “God loves a cheerful giver.” Using part of your extra income for tithing or charitable giving can bring a sense of joy, purpose, and fulfillment, especially during the holiday season.
Pro Tip: Decide on a fixed percentage of your 13th month pay that you’d like to dedicate to giving. This could be 10% for tithing or any amount that aligns with your financial values.
3. Build or Boost Your Emergency Fund
An emergency fund is your financial safety net for unexpected situations, such as medical emergencies, car repairs, or job loss. Financial experts often recommend setting aside three to six months’ worth of living expenses in an easily accessible savings account. If you haven’t yet built an emergency fund or if your existing fund could use a boost, your 13th month pay is a great opportunity to grow this crucial safety net.
Pro Tip: Open a high-yield savings account specifically for your emergency fund. This way, your savings can grow with interest while remaining accessible if you need it.
4. Invest for the Future
Investing part of your 13th month pay can help you grow your wealth over time. The earlier you start investing, the more you benefit from the power of compounding interest. There are many options for investments, such as stocks, mutual funds, or even retirement accounts. It’s wise to begin with a basic understanding of these investment vehicles and consult a financial advisor if needed. Proverbs 21:20 says, “The wise store up choice food and olive oil, but fools gulp theirs down,” highlighting the wisdom in preparing for the future.
Pro Tip: Start with a conservative investment in a mutual fund or a diversified portfolio if you’re new to investing. Consistency and time are your best friends in building wealth through investments.
5. Reward Yourself Wisely
Finally, while it’s essential to be prudent with your 13th month pay, it’s also okay to set aside a small portion to reward yourself for your hard work throughout the year. This doesn’t have to be extravagant—maybe it’s a nice dinner, a short trip, or a gift you’ve been wanting. Giving yourself a modest reward can help keep you motivated to stay on track with your financial goals.
Pro Tip: Allocate a set percentage (like 5-10%) for personal enjoyment. This way, you indulge yourself a bit without straying from your financial goals.
By paying down debt, tithing, boosting your emergency fund, investing, and rewarding yourself wisely, you’re using your 13th month pay to create long-term financial stability. Remember, every financial decision you make today can have a lasting impact on your future. Enjoy the fruits of your hard work, and use this blessing as a stepping stone towards a brighter financial future!