It’s that time of the year when Filipinos are happiest. Many are eager to receive their 13th month pay to buy presents for family and friends, and to splurge a little on gadgets. For some, there are extras, perhaps even a 14th and 15th month pay.
How do I spend my 13th month pay?
How do you use it? I strongly suggest you think a little beyond the holiday season, Christmas presents and merry making. Why don’t you….
Close to 70% of people who get large amounts of money go broke within 5 to 7 years. This is because many people are so unfamiliar with having a large amount of money. Plan how to use your money, and budget how much you want to spend for Christmas and how much you want to allot for more productive use.A good rule of thumb is 10% for your spiritual community, 20% for your future, and 70% for your expenses and lifestyle:
- 10% for your eternity
- 20% for your maturity
- 70% for your family
And then you plan further. How do you spend your 70%?
- Protect Your Family
Have you considered what would happen if the Lord decides to call you home early? What would happen to your family? You can be healthy today, but what if tomorrow, you meet an accident? Will your family go hungry?Buy SUFFICIENT life insurance coverage. There are inexpensive options available, such as term life insurance. P6,000 annual premium at age 25 can buy you P1M coverage.Combined with some mutual fund investments, P3,000 per month for 10 years can buy P1.2M of life insurance at age 25, slowly growing to more than P4.8M coverage ( or P3.8M cash benefit) by age 60.
Learn about protection, savings and investment in free seminars, like the SAVING YOUR FUTURE seminars on Practical Money Management from IMG.
- Eliminate debt
The typical Filipino makes strange financial decisions. Most save in banks where their money earns 0.20% per year (that simply means if you put P100,000 in the bank on Jan 1, then by December 31, the bank will give you P200 interest after withholding tax), but borrow from the “friendly Bumbay” at 5-6, or from the “sosyal” credit card company at 3.5% PER MONTH.
Pay your credit card debt. By paying credit card debt you effectively invest your money at a rate at least equal to the 3.5% they charge you.
Read more about How to Invest by Paying Your Credit Card, and earn an equivalent compounded annual growth rate of approximately 51%
Investing is increasing the value of your assets using your existing resources, like time and money. While some consider investing a science, there are enough elements of creativity involved, I prefer to think of it as an art.Investing in your greatest asset – you – is probably your best investment. You probably invested hundreds of thousands of pesos in your formal education (elementary, high school, college) so you can get a good job, and work for money.
Invest in your financial education, to learn how make money work for you, and to gain financial wealth and spiritual abundance at the same time. Join the TrulyRichClub.
Start by taking a crash course in stock market investing.Invest in safe investment vehicles to build your retirement fund and your children’s college funds. Equity mutual funds and UITFs are good starting points.
- Setup Your Emergency fund
Setup your emergency fund, normally three to six months of your living expenses. Emergencies are for emergencies or unexpected large expenses such as medical emergencies or temporary unemployment. Sale in malls are not emergencies, even if your dream shoes are on sale at 70% off.
Keep your emergency funds in savings or time deposits.
Spend a little on yourself. Save specifically on little pleasures for yourself, maybe an occasional vacation or adventure. Save for your future, but treat your present self every now and then.
A note on the 10% for Eternity
Share your blessings to your spiritual community and to the less fortunate. Remember we are merely managers of of God’s wealth. Giving actually makes you feel more blessed, and appreciate the abundance of God’s universe. Giving makes you win in all areas of your life. In other words, TrulyRich.
Bobet Prudente is a financial coach and Senior Marketing Director at IMG TrulyRichMakers. He is a member of Bo Sanchez’ TrulyRichClub . He conducts regular FREE Saving Your Future seminars on Practical Money Management Techniques in Quezon City.