Bonus Time

It’s bonus time. You’re about to get PAID! Well, not exactly.

Some of you have already spent your bonus. Remember that vacation you took and said, “let’s charge it and use the bonus to pay off the credit card.” Yep, it’s gone. Now, just make sure you pay off the card.

Others of you have already planned for the bonus. You’ve done plenty of window shopping. You know exactly what you want to buy. You’ve shown all your friends pictures of it. You’re committed. I want to talk you out of it, but it’s probably no good. Just try to get a good deal and don’t finance anything!

Lastly, for the select few, you’re crafting your plan. You want to make smart decisions with the money. You have lots of options – payoff debt, save it for a rainy day, invest it, spend it, give it away. It’s all in front of you.

So what do you do? I suggest using the 10/20/70 rule. Let’s assume your bonus is $5,000 for this example. Here’s how it works:

• 10% ($500) – Spend 10% of it. Get what you want. Get it now. You’ve earned the bonus and it’s nice to see the rewards. Enjoy it.
• 20% ($1,000) – Put it aside as a reward. It’s a reward when you hit your next SmartGoal. If your next SmartGoal is to pay off your bad debt, you’ll get $1,000 when you make it happen. It’s a little extra motivation.
• 70% ($3,500) – Put this towards your next SmartGoal using the SmartPath System. Don’t split this money between debt, emergency fund, investing, etc. That doesn’t work. Instead, figure out where you are in the SmartPath system and put this towards your next SmartGoal. If you don’t have a 1-month emergency fund, put it there. If you have a 1-month fund but still have bad debt, pay it off. If you’re past bad debt, use this to build your fund to 3-6 months. And, if you’re past all of that, put it towards retirement.

Some of you are asking – what about a down payment on a house? What about investing in a business? If you’re past SmartGoal #4, you should consider these options with your 70%. If not, stick with the plan. A few more bonuses and you’ll be in great shape.

What do you plan to do with your bonus? What are some other options on how to use the extra money?