For workers, Ramadan is identic with double income, coming from salary and THR [Idul Fitri bonuses]. However, if not managed well, this income could blow through quickly. With the amount of spending desiring for Idul Fitri, and followed by a new academic year for children in school will certainly make parents struggling in managing finance if they’re not prepared in advance. How to ideally manage salary and THR?
A monthly salary is an income that will be used for daily needs for the next month. Like any other month, a fixed salary is used for living routine expenses, credit installment expenses, saving and investing expenses, and emergency funds. However, it is understandable that during Ramadan there will be changes in the spending patterns, that is the addition in charity expense, breaking-of-the-fast gathering expense, and sending out parcel expense. Thus, making it wiser to cut some spending in other expenses.
On the contrary, the THR fund is a yearly income that is received by every worker. The amount may vary, whether the same or two times the amount of monthly salary. THR allocation is for at least these 3 mandatory expenses.
First, for alms and charity. For Muslims, it is an obligation for those who are able to fulfill fitrah alms, and THR funds should be able to be allocated for this expense. Other than that, you can also add charities and postponed wealth alms to this expense. Understand that alms calculation is rigid according to Islam rules. Whereas charity is voluntary and limitless. 10% fund allocation from THR considered enough to help household finance.
Second, Idul Fitri's needs. Each household does have different wants and needs. But, in general, the Idul Fitri needs of each family can be identified consisting of Idul Fitri meal, clothes and accessories shopping, THR for families, and Lebaran exodus. Due to limited income with lots of wants, self-control for Idul Fitri needs allocation is very important. Prioritize the THR fund usage for the worker’s right and for Idul Fitri meal. If there are remaining funds, then it can be used for other shopping expenses. Ideally, the maximum usage of the THR fund should be 50% on this expense.
Third, emergency fund. For when infal service or temporary domestic maid is needed or for any other emergency spending, funds can be allocated from emergency fund expenses. In addition, unexpected events during Idul Fitri such as sick, car broke down, and others will make the emergency funds very much needed. Lastly, if there is excessive spending during the Lebaran holiday, the additional living costs thereafter can be assisted by the emergency funds. Try to allocate 10% off THR for this expense.
All three expenses should be very well separated from the salary account for operational. This will prevent any mistakes to be made from financial management. Separation could be done in a saving account that has a debit card and an ATM card.
After allocating for the three mandatory expenses and financial goals for the near future, THR funds could be very well used for investing. Choosing investment assets should be adjusted to the desired financial goals. If it is short term, assets that are used are only limited to savings and money market mutual funds. However, for the long term, assets that are used can be more aggressive such as stock mutual funds. Try to allocate around 10% for investing.
For Muslims, I recommend allocating THR funds for Idul Adha needs such as for sacrificial animals. In the next two months, these needs will arise whereas there will be no more additional income. Therefore, try to set aside 10% off the THR funds to be used for Idul Adha. If there are still remaining THR, then the family can spend it as an extra fund for holiday and exodus expenses.
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Written by: Prita Ghozie from ZAP Finance
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