Payday week is here! And I’m sure we all got a little more than what we usually get—thanks to the mandatory 13th month pay and for the luckier ones, Christmas bonuses from our employers. With all the Christmas bazaars going on and the extended mall hours, it is very tempting to spend the extra cash we just got on Christmas shopping, whether for ourselves or for others. But before you do just that, let me tell you first how you can spend your Christmas bonus wisely.
1. Pay yourself first.
No, this doesn’t mean that you should pay yourself first with things you’ve always wanted to buy. This means that you should look out for your future self and set aside money for your savings. I first learned about this principle in Robert Kiyosaki’s book, Rich Dad Poor Dad. He says that paying yourself first is the key to getting rich. (He makes his point by showing two diagrams, which you can see here.)
Inigo Arenal, a former senior associate in a consulting firm who is now a full-time entrepreneur and owner of The Coffee Farmhouse, says that when he gives advice on how to spend properly, he relies on an equation. “It’s all about following this equation: income – savings = expenses, and not income – expenses = savings.” Instead of letting your savings be a variable result of the equation, start your month with a set amount of savings in mind. Let your savings determine how much you will spend, not the other way around.
Kam Omolida, who currently works at the Ayala Museum, shares that part of her bonus goes to her “rainy day fund,” which, for her, should be 4 to 6 times your monthly salary. When asked how much of the 13th month pay and bonus she’d recommend for people to save, she says at least half of it. “Technically, you survive without your bonus—you live off of your normal, bonus-less salary. Why not allot your bonus to filling up your rainy day fund?” she says.
Personally, I follow this pay yourself first principle: what I do is I save 30% of my salary every month, and still try to save from what’s left of it by spending less and tracking my expenses through an app called HomeBudget. For this month, on top of my monthly savings, I saved 50% of my 13th month pay and bonus. Looking at how much savings I have boosts my confidence and motivates me to save even more. So, if you haven’t started religiously setting aside money for your rainy day fund yet, start now and start big if you can. Your future self will thank you.
Nervous and stoked at the same time with the thought of financially sustaining myself and being independent, I spent the two months after graduation, and before getting my job in Kalibrr, reading personal finance books from authors like Robert Kiyosaki, T. Harv Eker, and Bo Sanchez. All of them share one belief: it is wise to invest early. Like the first tip, this is about looking out for your future self.
Don’t let your money rest in the bank when you can invest some of it on stocks, mutual funds, or a business and thus earn passive income later on. Carlos Slim, the richest man in the world from 2010 to 2013, says that “anyone who is not investing now is missing a tremendous opportunity.”
Investing entails risk, however, so better read up first before doing so. I recommend reading Bo Sanchez’s My Maid Invests in the Stock Market to kick things off with you and your road to financial freedom. While you do some reading over the holidays, make sure to not spend the money you’re saving for investment. Read up fast and invest soon (but wisely) because time is ticking and our economy’s booming—you wouldn’t want to miss the opportunity to financially boom with it, would you?
3. Pay off debt.
Wouldn’t it be nice to start 2016 debt-free? Imagine welcoming the year with a clean slate, with nothing to worry about because you settled all your debts already with your 13th-month-pay-plus-Christmas-bonus combo. Doing so saves you money in a way, too—you’re saving yourself from huge interests of unpaid credit card or bank loan bills. And imagine all the worry you’ll be letting go once you pay your debts off!
4. Treat yourself and your loved ones (only once).
Of course, you deserve a treat with all the hard work you did for the past year. Go ahead and reward yourself for a job well done! Use the it’s-Christmas-let-me-get-what-I-want pass and let your emotions dictate your purchase for once. Once.
As for the rest of your purchases, whether it’s still for yourself or this time, for your loved ones, be wise. Don’t be an impulsive shopper, and take advantage of all the Christmas sales and bazaars going on this season. Make sure to spend only within budget. If you want to extend your budget, don’t get from your savings—instead, get creative and find ways to earn extra cash.
To make sure I avoid impulse buying and stay within budget, I do the “Can I let this go?” test when shopping. When I am holding on to something I want to buy, I bring it with me for a while and test if I can literally let go of it and not mind before I go for the cashier. If I can let it go, it means that I don’t want or need it enough and so I don’t buy it.
5. Give back.
Isn’t sharing and giving the real essence of Christmas? Whether it’s to you parents, grandparents, or to complete strangers, make sure to allot some of your money to give back. Maybe your grandmother could use the extra money for her maintenance medicines, or your parents for your younger siblings’ allowances? How about handing out more Christmas bonuses to the security guard in your building who never fails to greet you with a smile, or the staff who washes the mugs you use for your coffee as a sign of appreciation? What if you sponsor a child on World Vision for only Php 600 a month from now on?