The Philippine government has officially started to implement the Tax Reform for Acceleration and Inclusion Act (TRAIN). And one of the positive changes that this brings to Filipinos is that they’ll now receive a higher take-home pay – a welcome relief amidst the rising inflation rate that prompted price increases in basic commodities
Under TRAIN, those receiving P21,000 and below per month are exempted from paying Personal Income Tax, while those earning above this amount will have substantial tax cuts. Moreover, the 13th month pay and other bonuses not exceeding a total of P90,000 also becomes non-taxable under the TRAIN. These affect non-minimum wage earners such as office workers, BPO agents, and many others, who will now receive an additional P2,000 to P6,000 on their monthly salary. This can certainly make a difference and help Filipinos live more comfortably today.
But how exactly can you make the most of the extra money from having a higher take-home pay? Here are tips you should consider for better financial planning:
1. Build up your emergency fund.
If you don’t have savings, then it’s time to start one. It’s important to have an emergency fund, which should be 6 months' worth of your expenses. If you already have some money saved, then make sure to build it up until it reaches this amount.
I often say that an emergency fund is your “sleep well at night” fund for that’s exactly what it does. It helps you avoid financial stress because you don’t have to worry where to get the money if a cash emergency happens.
2. Pay off your debts.
Allot a portion of the extra money you’ll receive towards paying off your personal loans and credit card debts. By getting rid of these, you’ll also eventually free up some extra cash, and save more from paying on interest fees.
If you have several credit cards, then learn about the Debt Snowball Method. This is an effective strategy that will help you pay off your debts in a systematic manner. It’s what I personally used years ago when I had a lot of credit card debts.
3. Prioritize your needs.
It’s tempting to immediately upgrade your lifestyle when you start seeing new numbers on your paycheck. My advise is to hold off on applying for that gym membership or buying that new phone, and analyze your current spending first.
List down your necessary expenses – food, transportation, rent, utility costs, etc. – and make sure that you have all your NEEDS covered, which should include putting some money towards your savings and debt payments. Once you’re done, you can now budget for the WANTS and decide where to spend the excess amount.
4. Start investing.
Many think that you need to be rich if you want to start investing. However, the truth is you need to start investing if you want to be rich. And there are a lot of investment products today where you can start with only as little as P1,000 and that can help you fight inflation by making your money work harder than a traditional deposit account.
Moreover, keep in mind that knowledge is also an investment. This means, you can also choose to spend your extra money on learning new skills, and perhaps increasing your financial literacy. You can attend seminars, enroll in workshops, and buy books, among others.
With the additional monthly income courtesy of the TRAIN law, we can make better financial decisions that can help us cope with the effects of inflation. After all, the best way to help our country achieve this vision is to take care of our own personal economy. By doing proper money management, continuously working on improving ourselves, and regularly investing for our financial goals, we can expect a brighter future ahead for all of us.