Better ways to spend your Christmas bonus

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It’s the season to be merry! The weather is cooler, the people are more cheerful and employers are more generous. On the other hand, the holiday traffic in Cebu is worse, and pedestrians are more impatient. I love the holidays!

However, at no other time of the year other than this time, is there the most temptation to spend beyond our means – it is often the season of maxed-out credit cards, excess borrowing and empty wallets! Not all spending is wrong, but we wouldn’t want to approach 2017 with an empty wallet and a credit card balance. If you can’t be good this holiday season, there are ways to establish a modicum of savings towards the end of 2016.

The 13th month pay aka Christmas bonus

Other than the mandated 13th month pay, which employers are required by law to give employees, some employees are lucky to receive 14th, 15th, 16th month pay or even more. The names of these bonuses may vary – grocery allowance, Christmas bonus, etc. What’s important is how you spend it.

A modicum of savings – Secure 20% first

Not everyone earns a large amount in bonuses, so for those who receive so much less, I suggest securing 20% (or at the very least, 10%). This should be done immediately right after withdrawing your bonus from your ATM. This removes the temptation to spend this money, which should be out of sight.

This money should be out of sight and beyond easy access once you deposit this in a PASSBOOK account. The Christmas bonus isn’t part of your regular salary and so it shouldn’t be required for household expenses and such. I’m personally very fond of the passbook account.

Other options – investment

If you can go further and save a little more, I suggest saving the entire Christmas bonus and invest! Aside from placing your money in bank deposits or in a time deposit account, you may opt to invest in equities, bonds and treasury bills. To know how much you should invest in stocks, just click here.

If you’re not ready to take the plunge and invest in capital instruments, which undoubtedly require more than a little cursory understanding , there are easier options such as: (a) gold and (b) foreign currency .

Gold and foreign currency

A dress or a shirt from any of your favorite fast fashion chains – Mango, Zara, Berschka, Topshop, Forever 21 or H&M costs on average PhP 2,000.00 (USD 40.00). It may sound like no big deal for a hot outfit, but then that outfit doesn’t pay dividends and eventually values at zero. Simply put, you can’t really resell your clothes at a profit nor even at cost price.

Gold is a great fashion buy which has the possibility of appreciating in value while being relatively liquid. How easy is it to pawn gold jewelry after all!

SIDEBAR: Note that generally, the price of gold is inversely related to the price of US dollars. Thus, if US dollars appreciate, dollar-denominated commodities, such as gold, thereby become more expensive to buy and become unattractive to buyers (i.e. lowers demand), resulting to a lower gold price. In the Philippine context, US dollars are appreciating right now, making gold prices lower. It is THE right time to buy gold.

One night I was contemplating an H&M purchase until I stumbled into a jewelry store and found the most amazing camel shaped earrings. I’m not usually a fan of authentic gold jewelry because they are prone to theft or other causes of loss. But these earrings are the prettiest camel shaped earrings I’ve ever seen. It was my first gold jewelry purchase ever. I’m more accustomed to being a recipient of jewelry rather than a buyer. But for the first time, I was intrigued.

This purchase wasn’t merely aesthetically pleasing, it was a wise financial investment (assuming I don’t lose these earrings lol) as gold is always easy to convert to cash, in a pinch. Also, the next time I get an urge to shop for accessories, I could always invest at the same time.

Another way to invest may be by buying major foreign currencies (US dollars, pound sterling, yuan) You could speculate on the currency price (buy low) and wait for its price to appreciate (sell high ). Transaction costs are quite minimal. These foreign currencies may be placed in foreign currency denominated bank accounts to grow interest, earning you double on the interest and on the resale price.

And lastly, if you feel the need to spend, remind yourself of the basic needs- food, shelter, clothing. Spend only on what you need and try to resist blowing all of your bonus on mere wants.

How do you plan to spend your bonus?

xoxo,
20 something lawyer

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