For workers across Brazil, the 13th salary is a welcome financial relief at the end of the year. Often seen as an opportunity to catch up or get ahead, this bonus can be a powerful tool for improving your financial situation when used wisely.
However, with the rising cost of living, high credit interest rates, and the temptation to spend during the holiday season, it’s easy for this extra income to disappear quickly. Here is a financial guide on how to make the most of your 13th salary, tailored to the Brazilian context.
1. Prioritize Paying Expensive Debts
Paying off debts should be the top priority for most Brazilians receiving the 13th salary, especially high-interest debts such as credit cards and personal loans. Credit card interest rates in Brazil are among the highest in the world, often exceeding 300% per year. Imagine you owe R$ 5,000 on your credit card. By using the 13th salary to pay this off, you can save hundreds or even thousands of reais in interest. If you’re unable to pay the full amount, focus on reducing as much as possible to ease the financial burden in the coming months.
Pro Tip: If you have multiple debts, consider using the avalanche method—prioritizing the debt with the highest interest rate—or the snowball method, which focuses on paying off the smallest debt first for a psychological boost.
2. Create or Strengthen an Emergency Fund
In Brazil’s unpredictable economic climate, an emergency fund is essential. An unexpected expense, such as a medical emergency or home repairs, can quickly throw off your finances if you don’t have savings.
Experts recommend saving the equivalent of three to six months of essential expenses, such as rent, bills, and food. While this may seem challenging, starting with part of your 13th salary is a good first step. For example, saving R$ 1,000 now can cover car repairs or minor medical costs.
3. Save or Invest for Growth
Putting the 13th salary into savings or investments allows your money to grow over time. In Brazil, there are several low-risk investment options that cater to different financial goals,
- Tesouro Direto: Government bonds that offer a safe and predictable return. The Tesouro Selic, for example, is ideal for short-term goals and is less impacted by market fluctuations.
- CDBs (Certificates of Bank Deposit): Offered by banks, they provide higher returns than traditional savings accounts when held until maturity.
- Savings Accounts (Cadernetas de Poupança): Although less profitable than other options, they are a simple and accessible way to set aside money.
Even modest investments can grow significantly over time due to the effect of compound interest, making this a smart decision for medium- and long-term goals.
4. Plan Your Expenses for Early 2025
January is often called the “month of bills” in Brazil, due to expenses such as school fees, IPVA (Vehicle Property Tax), and annual renewals like insurance. Using part of your 13th salary for these predictable costs can reduce financial stress.
For example, if your children’s school fees are due in January, setting aside funds now ensures you won’t be caught off guard. Similarly, saving for vacation trips or New Year celebrations helps you enjoy the moment without relying on credit cards.
5. Start or Strengthen a Retirement Fund
Planning for retirement is crucial, and the 13th salary provides an opportunity to contribute to your future financial security. Although Brazil’s public pension system (INSS) offers some support, many Brazilians find it insufficient to maintain their desired standard of living after retirement. Consider investing in private pension plans, such as PGBL or VGBL.
These plans offer tax benefits and can be tailored to your retirement goals. Contributing R$ 1,000 or more annually to these plans allows you to take advantage of compound interest and tax incentives while building a secure fund.
6. Diversify Your Investment Portfolio
If you already have an emergency fund and are comfortable with your basic financial obligations, the 13th salary can be used to diversify your investment portfolio. Diversification helps reduce risks and maximize returns by spreading your money across different types of assets. Options for diversification in Brazil include:
- Real Estate Investment Funds (FIIs): Offer exposure to the real estate market without the need to own physical properties.
- Stocks: Although riskier, investing in the stock market through Brazilian companies can generate higher long-term returns.
- Cryptocurrencies: Allocating a small percentage of your bonus into cryptocurrencies, such as Bitcoin, can be an option for those willing to take on higher risk in exchange for potential rewards.
Make sure to consult a financial advisor or research these options to align them with your risk profile and financial goals.
7. Plan Your Year-End Purchases and Celebrations
The end of the year is a festive period in Brazil, with family gatherings, Christmas dinners, and New Year’s Eve parties. It’s easy to overspend during this time, but a clear budget can help you enjoy the celebrations without regrets. Set aside a fixed percentage of your 13th salary for gifts, food, and travel. For example, if your bonus is R$ 3,000, you could allocate R$ 600 (20%) for the festivities. This ensures you’ll have enough for more important financial needs.
Pro Tip: Take advantage of promotions during events like Black Friday to secure the best deals on your year-end shopping.
8. Treat Yourself, but Responsibly
While it’s crucial to focus on financial stability, rewarding yourself for a year of hard work is also important. Whether it’s updating an electronic device, taking a short trip, or buying something you’ve desired for months, allocating a small part of your 13th salary for personal enjoyment can boost your motivation.
However, make sure this expense aligns with your overall financial plan. A good rule of thumb is to limit this portion to 10%-15% of your bonus.
9. Support a Long-Term Goal
Your 13th salary can also be a starting point for larger financial aspirations. For example:
- Saving for a Home Down Payment: If you’re planning to buy a house, every real counts.
- Advancing Your Education: Invest in a course or certification that can improve your skills and career prospects.
- Starting a Business: Use the extra income to fund the initial costs of a side project or start a small business.
Long-term goals require consistency, and allocating part of your bonus each year can help you make significant progress.
10. Consider Donating
Many people in Brazil use their 13th salary to make donations or help needy family members. Whether contributing to a local cause, supporting an NGO, or assisting a loved one, even a small part of your bonus can make a big difference. For example, R$ 200 can provide school supplies for underprivileged children or fund a week of meals for a needy family. Acts of generosity not only support your community but also provide a sense of fulfillment.
Conclusion
Your 13th salary is a valuable financial tool, offering a chance to improve your financial stability while enjoying the fruits of your hard work. By prioritizing debt repayment, saving for emergencies, investing wisely, and planning for both future needs and present pleasures, you can make this bonus work for you in the short and long term.
This year, adopt a strategic approach to your 13th salary. A little planning now can lead to a more secure and stress-free future. Use it wisely—and make it count!
