For corporate professionals, Q1 is bonus season. It is a moment of high emotion and suddenly having a large chunk of liquid cash hitting your account. The temptation to upgrade your car, book a luxury holiday, or treat yourself is immense. You worked hard for it, right?
I am not going to tell you to put all of it into your pension. That is depressing. But blowing all of it is a missed opportunity.
The Rule of Thirds
When a bonus lands, I advise clients to use the Rule of Thirds:
- One third for the past: Pay off any lingering consumer debt or top up your emergency fund if it took a hit.
- One third for the future: Put this straight into your ISA or SIPP. This buys you freedom and options later in life.
- One third for the present: Spend it on whatever brings you joy. Guilt-free. You earned it.
This framework satisfies your desire for a reward while ensuring your net worth permanently improves.