If you’ve been employed for a month or more in the private sector, you can look forward to receiving extra pay this December, thanks to Presidential Decree 851.

Regardless of employment status (regular or probationary), and salary payment method (cash, check, via bank deposit), all rank-and-file private sector employees are entitled to 13th month pay, according to the Department of Labor and Employment.  Some companies extend this benefit to those in managerial positions, or even to all their employees, so you may want to ask when job-hunting.

What’s more, the 13th month pay is exempted from tax up to P90,000.  So if your benefit exceeds this amount, you will only pay taxes on the difference.  For example, if your 13th month pay is P100,000, you will only be taxed for the P10,000.

And because this government-mandated benefit must be released on or before December 24, many consider the 13th month pay as their holiday bonus.  Sadly, holiday bonus is not mandated, but some companies do provide one, ensuring their employees have more cash to celebrate this season, and rewarding them for their contributions.

Knowing that the 13th month pay will be paid out in December, and assuming they will remain employed, many start planning months ahead how to spend it. Not to be a Scrooge, but why not make plans saving it instead? Here are some tips how you can turn your bonus into lucky money that can last for months and years.

#1 Not a good idea to borrow against it

Until your 13th month pay has been deposited in your account, best not to take out a loan against it. Many things can happen that can lead to problems.  One, the credited amount may not be what you expected.  If you took any unpaid leaves during the year, that will count against your bonus.  Two, the extra pay has no set release date, except a deadline.  Some companies release their 13th month pay early, and it’s dangerous to assume it will happen each year.  Maybe you usually get it in November, but if your company has cash flow issues, they can choose to release on or closer to the deadline.

#2 Pay yourself first

When we get a windfall, we usually start spending it by paying off loans, utilities, or buying items that have been in our wish list for a while like a new phone, or gifting our loved ones.  Hold off on all that, and consider paying yourself first.  This simply means setting aside an amount for you, and for your savings.  Don’t wait for what will be left after all your spending because chances are that will be small amount, or worse, none.  Pay yourself first, then you can spend the rest as needed.

#3 How about 50% savings, instead of going for 50% off deals?

Who can resist half-price offers?  If you come across deals for clothing, shoes, electronics at 50 percent off, and with your 13th month pay burning a hole in your pocket, chances are you would cave.  That’s why it is important to pay yourself first, and if you can afford it, set aside as much as half of your bonus. Too much?  Then go for a number that will at least hurt a little, whether it’s 40 percent, 30 percent, 20 percent or 10 percent.  If possible, try to not go lower than 20 percent.  

#4 Don’t just save, but invest

Traditional banks pay very little interest, and while digital banks are offering more attractive rates, you also need to be wary of fees when you need to withdraw or cash out or simply transfer funds.  These fees could eat into those attractive rates that you end up paying more in fees than earning interest.  While saving is good, investing is better.  The risks are higher, but the rewards are potentially greater.  Investment is the best way to beat inflation and grow and preserve your wealth over the long run.  Before investing, make sure to do your research on your risk appetite and the products you will invest in.

#5 Get support from family and friends

If you plan to get into serious saving, not just for your 13th month pay but for 2025, try and get the support of family and friends.  This way, they will understand why you would rather not go shopping, or eat at restaurants often, or go on expensive vacations.  When the people who matter to you support you, saving and investing become a little bit easier.  They can make sure you don’t feel left out, and maybe they will also catch your saving and investing bug.  This way, your bonus does not just give you joy this month, but into 2025 or longer.