That was one swanky 2-bedroom condominium unit worth P14 million gifted to the Philippines’ sole Olympic gold medalist Hidilyn Diaz. She also has very generous cash rewards coming her way, and if we pool hers together with the other silver and bronze medalists Nesthy Petecio, Carlo Paalam, and Eumir Marcial, we are looking at a pot of over P100 million! Note that Diaz will get more than half of this pie.
Their life-changing windfalls reminded me of lottery winners here and abroad who won big and sadly also lost big because of mismanagement. Diaz candidly admitted that she made wrong choices back when she won an Olympic silver medal in 2016 and walked away with P7 million plus a house and lot. She is determined to learn from her mistakes and will now seek advice when it comes to saving and investing her new fortune.
You don’t need to be an Olympian or to win a lottery to luck out and find yourself with a small fortune. It could come from an unexpected inheritance, or a performance bonus from your employer, or winning a raffle prize from your neighborhood grocery. If this happens to you, here are some money questions you need to ask.
#1 Who’s paying for the tax?
Some prizes are tax-free and that’s the best kind to win and receive. The tax for prizes here in the Philippines is fairly straightforward and set at 20 percent of the amount. In the case of our Olympians, their cash incentives from the government are tax-exempt so that’s one less worry for them. As for the cash rewards coming from private persons and companies, the Bureau of Internal Revenue has said these will be treated as a donation. The donor’s tax is set at 6 percent and will be paid by those giving the cash rewards, and will not be a burden to the medalists.
#2 Can I afford to keep the prize?
Years ago, a friend of a friend won a car in a shopping mall raffle promotion. After she learned the tax that she will have to pay, she decided to find a buyer for the car so she can pay off the taxes and pocket the difference. She had to take a bit of a loss on the sale value of the car, but still came away with hundreds of thousands of pesos. One more reason she decided to sell is because she already owns a road-worthy car and did not want the cost of maintaining two vehicles. That was smart of her because not only did she collect cash, she also saved herself the expense of repairs for two cars when she only needed one.
#3 Will the prize cost me more in the long run?
Tax or no tax, some prizes will cost you if you decide to keep them. Take Diaz’s swanky condo for example. It came fully furnished and ready for move in, but all condominium units collect association dues for the upkeep of common areas. A quick internet scan revealed the association dues of residential buildings in her area is about P50 for every square meter. Assuming the unit is 100 square meters, that’s P5,000 monthly. It’s okay if Diaz will live in the condo (I heard she already moved in), but if she trains abroad and is gone for long periods, she will be incurring that cost, plus monthly utility bills and this will add to her living expenses.
#4 How to know if better to cash in?
Many people tend to be superstitious when it comes to prizes, meaning they will hang on to it because selling it may bring bad luck. The friend of my friend was more practical and she knew early on that while a new car was nice to have, she will enjoy the cash more. If you won a house and lot in a neighborhood that is too far from your workplace and from your kids’ school, it may be better to sell off and liquidate if the price is right. More so if you already have a comfortable house closer to your work and school. Hanging on to a second home or a second car will mean doubling your living expenses and you are sure to feel the pain at some point.
#5 What to do with family and friends asking for a handout?
Learn to say no. I’m not saying you say no to all of them, but you cannot afford to say yes to all of them too. Before saying yes or no, work on a list and decide who gets which answer. For the yes, also indicate a budget amount so you avoid emotional giving or being shamed into giving more. For our Olympic medalists, the road to bronze, silver and gold was a lonely one filled with personal sacrifices. They alone deserve the secure financial future their achievements have bought them, and let’s hope their family and friends recognize this too.
Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.