Smart Ways to Grow Your Bonus Using the 50-30-20 Rule

Image Source : Fortune India

Receiving a performance bonus is an exciting financial opportunity, but without a structured plan, it can be easy to spend impulsively. Experts recommend using the 50-30-20 rule to ensure a balanced approach that strengthens financial security while allowing for personal rewards.

Strategic Allocation:

50 percent for investments: This portion is dedicated to wealth-building and beating inflation. Options include equity mutual funds for long-term growth, Public Provident Fund for tax-free returns, and National Pension System for retirement planning.
30 percent for savings and debt repayment: Prioritizing financial security, this segment should go toward an emergency fund covering six months of expenses, clearing high-interest debt, and short-term savings in fixed deposits or recurring deposits.
20 percent for personal goals: This is the reward segment, meant for lifestyle upgrades, vacations, or skill-building courses. It can also contribute toward medium-term goals like a home down payment or a major purchase.

For example, if you receive a Rs 1 lakh bonus, you could allocate Rs 50,000 to investments, Rs 30,000 to financial security, and Rs 20,000 toward personal goals. Experts emphasize that a structured approach prevents unnecessary spending while ensuring long-term financial stability.

Sources: Fortune India, Economic Times, Investopedia.