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How to spend your THR in a smart, effective way
It is in everybody’s interests to understand more about the THR and what it should be used for.
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There is a financial blessing that is closely related to Ramadhan, a once-a-year payment that is considered unique to Indonesia and is awaited by employees — the Idul Fitri holiday bonus (THR). (Shutterstock/*)
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span id="docs-internal-guid-3a16063c-5bd0-af81-7a13-ef2695ba67c2">There is a financial blessing that is closely related to Ramadhan, a once-a-year payment that is considered unique to Indonesia and is awaited by employees — the Idul Fitri holiday bonus (THR). Therefore, it is in everybody’s interests to understand more about the THR and what it should be used for.
What is THR?
The THR is a mandatory allowance in Indonesia that should be paid by employers to employees. Indonesia is an archipelago and many of its people have migrated to other regions for economic reasons, such as to make a better living, and that journey might be expensive. Thus, one of the many purposes of the THR is to enable employees to return to their hometowns and celebrate Ramadhan and Idul Fitri among family.
At the beginning of the year, it is advisable to look up national holiday dates by searching online or asking your human resources department. Thus, we can plan ahead long before Idul Fitri, and avoid ticket prices in peak season that can be 100 percent more than normal.
Who is eligible for THR?
Employees who have worked in a position for a year are eligible to receive the THR equivalent to one month’s salary, making it a valuable addition to income. Those who have worked for up to three months will be paid accordingly. Payment of the THR is 14 days before Idul Fitri, so be patient.
What should we do if we receive a better job opportunity near Idul Fitri? Do we let it go? Or do we sacrifice the THR for the job? This happened to me last year; I was confused and was about to forgo my THR from my existing company for the new job, but after I calmed down I filed a request with the human resources department at the new company to receive my THR in full, even though I might have only worked for a month. Guess what? My request was approved, and I could enjoy both the THR and a better job.
(Read also: Good things about a money-conscious concept)
What to do with THR?
Truth be told, my wife and I rarely use the THR that we receive. More often than not, after settling zakat (alms), every single penny of the THR goes straight into our investment account. This pattern is possible for us as we always plan our financial activities. As a result, until now our needs and wants are covered by our regular income.
However, as our behavior toward the THR is not common, we propose using the THR according to this pecking order:
Zakat > Debt repayment > Emergency funds > Investments > Daily expenses > Wants
As the purpose of rites in Ramadhan is to be grateful and share with one another, as proof that we have emerged as better people after the holy month, it is noble to not forget to pay the 2.5-percent zakat.
Having debts is a financial burden that can hinder one’s financial achievements. Therefore, being free of debt should be established as a financial resolution and the THR can be utilized to settle any debts that one might have.
Which debts should be settled early? Start with the highest interest bearing debt, such as credit cards, which have interest rates up to 36 percent or more per year.
The future is a mystery, I agree. As normal human beings, we might never have enough information to know what will take place in the future. Favorable events might occur, which is a good thing and is always welcome. At the same time, there might also be a sudden slump that could adversely affect our welfare. Therefore, to protect our own safety, it is advisable to spare some of the THR for emergency funds.
(Read also: 5 important points in teaching children about money)
Investment is me and my wife’s favorite way to use the THR. In simple terms, this means making our money work for us. Through investment, we can generate additional income, afford to acquire more productive assets and hope to provide our children with the best education. It opens up a path to a comfortable early retirement, and, more importantly, it allows us to be financially independent. After becoming financially independent, then what? Do what you love to do.
You can use the THR for your daily expenses. However, we are of the opinion that daily expenses should be able to be covered by regular income. For that reason, if you happen to use the THR for daily expenses, it is also a warning sign that there is an imbalance within your financial foundations and a financial check-up needs to be conducted to prevent it from getting worse.
It is human nature to have wants and we do understand this. As this is a special time that only comes once a year, allow yourself to use around 5 percent of the THR to please your wants as a self-reward and also to serve as encouragement to be better in the future.
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Pandu focused his study in finance, whilst Grani in accounting. The two met and are convinced to become a solid team of husband and wife. Both are self-proclaimed financial planning enthusiast and always thriving for a better tomorrow.
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