How to put your holiday bonuses to work

Courtesy of INQ7.net

Q: There have been talks in our office that we will be getting a rather substantial 13th month pay and Christmas bonus this year. I can already picture out in my mind all the things that I can buy with that holiday money but something tells me I better plan early so that it won’t disappear quickly the way my holiday bonuses seemed to vanish in the past. Any suggestions? -- Anna

A: You sound like a voice of reason amid the excitement probably being felt by almost all employed Filipinos at this time of the year. All employees get 13th month pay, but not all get Christmas bonuses so you should count yourself lucky!

However, we hope that you don’t feel too lucky that you splurge your holiday money all in one go. If you haven’t yet spent this money in advance the way a lot of Filipinos do (overspending even before the bonuses arrive), we suggest putting your holiday bonus to work so you can count on bigger treats in the future.

Below are some suggestions on what you can do with your cash:

1. Start saving for a big-ticket item. Have you been dreaming of that cool car or relaxing vacation for too long? Then use your bonus to kick off a smart savings plan. You may also use your holiday money for other medium-term goals, like graduate studies or a pad of your very own. If you don’t start now, that dream will slip farther away.

2. How about a business? They say a job gives you stability. Entrepreneurship, on the other hand, is the one that will make you rich. Don’t think that you need a lot of capital to start a business. With just P5,000, you can start making polvoron and other sweets then sell it at the office. You can also use that P5,000 to start a business making handmade beaded jewelry. Find out what you like to do and what you are good at. Who knows? Your business may take off and you could end up leaving your job and going into it full-time.

3. Get insured. If you don’t have health insurance benefits at work, it’s a must that you get your own health insurance coverage. There is never a convenient time to get sick. Use your bonus to pay for the premiums for next year.

4. Pay off debts. Use part of your windfall to pay your credit card bill in full, or that personal loan with the bank. Consider this your most creative gift to yourself. Not only will this allow you to sleep more soundly this coming year, you will also be taking a step further to being more financially stable.

5. Give to charity. You can share your blessings by giving to your church or a favorite charity. You might be surprised to realize later on that the blessings will come back to you.

How to grow your savings
If you’ve decided to practice delayed gratification and save for your future, it’s not enough that your money is tucked away safe in a savings account. There are many places you can park your cash where it can grow even more through higher interest rates.

• Unit investment trust funds. These are funds managed by banks and invested in government securities, bonds and stocks, depending on the kind of UITF. It can be peso- or dollar-denominated. Funds are pooled from small investors and invested based on their analysis of the markets. You can earn more than what savings accounts offer, depending on the market rates. But there are charges when joining and leaving the UITF.

• Mutual funds. These are like UITFs except that these are run by financial companies. Mutual funds enable small investors to take part in the investing game normally open to wealthier investors. They also come in different types depending on where they are invested in: government securities, bonds, stocks, or a mix. You will also be charged fees when joining and leaving the mutual fund.

• Bonds. Big companies may issue bond certificates which give you interest income when you place your cash with them. In effect, you are lending to them. The Philippine government is also into this. There are now retail treasury bonds (RTBs) at P5,000 each which will give you regular interest income quarterly. You can avail of RTBs and bonds from banks.

• Time deposits. You lock your money for a certain period (30, 60, 90 days or more) at a bank and you get higher interest in return. Time deposits are quite safe; however, you have a chance of getting higher interest if you will invest in the other options mentioned earlier depending on your risk appetite.

Christmastime is the best time to start thinking of your financial future. Get into the habit of saving as opposed to the feverish spending usually done this season and you can look forward to a brighter future ahead.

But we also suggest buying a reasonable treat for yourself, too. Those who deprive themselves too much are often vulnerable to a shopping splurge. But remember, keep it simple!