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Spend, Save or Pay Debt? How to Conquer Your 13th Month Pay Dilemma

Unlike holiday cheer, money is finite.
by Erwin Colcol
Dec 15, 2021
Photo/s: Shutterstock

With finite resources and lots of love to give, marketing professional Julian is using an Excel spreadsheet to make sure that his 13th month and December pay could finance both Christmas and his birthday celebration. It's the kind of tough and stressful balancing act that Filipinos face in what should be the happiest time of the year.

In the case of the 24-year-old, budgeting is made harder by the fact that his 13th month pay was used up by loan payments and essential expenses. How does one have a Merry Christmas without going into the New Year in financial ruin?

“I really had to look for the most cost-efficient way to celebrate my birthday and Christmas. Kasi kung hindi ko talaga iba-budget nang maayos yung income ko, walang matitira sa akin,” he told reportr.

With his spreadsheet, Julian got the budgeting part right, financial coach Prej Prestosa told reportr.

It's important to budget because it is an opportunity for us to save more, para ma-reach natin yung financial goals natin for the year. Also to invest, to prepare for the future, and also to give to others,” she said.

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“We need to watch out kung paano natin iba-budget yung mga matatanggap natin this December,” she added.

What to consider when budgeting for the holidays

Traditionally, companies give out their employees’ 13th month pay and other bonuses in December when expenses are usually higher than in previous months due to Christmas and New Year celebrations.

But even as people get more than their usual earnings during the holidays, they should remember that it’s because of the bonuses they received, not because there was an increase in their basic salaries. So even with the occasion, it’s still important to “live within our means,” Prestosa said.

“When we do our monthly budgeting, naka-base lang siya sa monthly salary. You don't count kung magkano yung year-end bonus mo, you don't count kung may 13th month pay ka,” she said.

Dapat yung monthly expenses natin, with the rent and the food and the bills, hindi dapat nagbabago yun. Different lang talaga with the 13th month pay and the bonus na mare-receive ng mga tao,” she added.

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So which part of one’s income should be used for holiday expenses? Prestosa advised to use your 13th month pay and other bonuses to buy noche buena items and gifts for friends and family. This way, your regular monthly income will still be reserved for food, bills and other recurring expenses.

But even annual bonuses should be spent wisely. For Prestosa, there are four things that you should prioritize when spending your extra money during the holiday season:

1. Pay your debts

Prestosa doesn’t recommend to use all your bonuses to pay your debts. But when there’s extra money, the first thing you should do is pay off your loans so you can end the year free of worries.

“It's so much better na less yung obligation mo towards other people bago ka mag-end ng taon,” she said.

2. Pay your future self

While some people don’t see the value of securing their future, Prestosa said it’s good to use some of your extra cash to get insurance or start investing. This way, you can be financially ready for whatever emergency that will come years from now.

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“There would come a time that we can't work due to retirement or to sickness and we really have to prepare for that. So if you're not preparing for that, who will?” she said.

Hindi araw-araw Pasko, hindi natin alam kung kailan darating yung emergency. So at least, if we can't be physically prepared for emergencies, at least financially we can be prepared,” she added.

3. Reward yourself

Christmas is that time of the year to reward yourself for all the hard work you did for the entire year. While there is nothing wrong in buying your favorite gadget or going on a trip using your bonuses, you should keep it within the budget, Prestosa said.

Hindi ibig sabihin na kailangan mong mag-budget or mag-save, mawawalan ka na ng kasiyahan. Kasi isa yun sa iba-budget mo. You just want it to be guilt-free, you want it to be organized,” she said.

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4. Give to others

Regardless of religion, Filipinos have a collective spirit of giving during the holiday season. So when you have extra income, it’s also good to share some your blessings to others, Prestosa said.


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How to start budgeting

One reason why some people find it difficult to manage their expenses is that they don’t know their priorities, Prestosa said.

“For them, how they spend their money is as long as may nakikita akong pera, pwede akong gumastos. Sila yung mga taong may petsa de peligro. Ibig sabihin hindi nila napapansin na paubos na pala yung pera ko, matagal pa yung next sweldo,” she added.

If you find yourself in this situation, Prestosa advised to list down your priorities and obligations and allocate money where they can be used efficiently.

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She suggested to follow the 50-30-20 rule when budgeting during the non-holiday months, where 50% of your basic income goes to operating expenses like food, rent, and other bills, 30% for investment and savings, and 20% for leisure.

For the holiday season, Prestosa advised to stick to your normal monthly budgeting, and use your extra money to pay your debts, to save for future self, to reward yourself, and to give to others.

Kailangan tayo maging mindful na hindi natin ubusin yung bonus natin this season,” she added.

But regardless of how you manage your expenses this holiday season, always remember to keep a little extra for yourself, Prestosa said.

Bahala ka na kung ipangt-travel mo yan o para yan sa lahat sa pamilya. But always magtira ka. Kasi again, hindi araw-araw Pasko," she added.

Prej Prestosa is a licensed financial advisor. If you’re looking for advice on how to wisely spend your money, you may contact Prej through her Facebook page or through email.

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