Turn Your Diwali Bonus into Long-Term Wealth: 50-30-20 Rule

The festive season between Dussehra and Diwali sparkle is a season of new beginnings, of family, and foremost of most of us—bonus season of the year. That sweet treat in your bank account aka the year-end bonus is the reward for your hard work – the endless hours, the sweat and compromise! So, the instinct to spend it is high: the latest i-Phone 17, a family trip for a week or new clothes for Diwali festivities.

Instead of spending the entire Diwali bonus, why don't we make that bonus productive. What if it can be used as a seed fund for a lifetime of wealth? 

What if we told you that swapping that momentary urge to splurge for a disciplined investment can make a difference of lacs of rupees in the years to come?

Let us tell you a secret. The key to balancing celebration and prudence is a simple 50-30-20 Rule, which you can apply on your Diwali bonus and become a millionaire. 

Meet Rohan, a 30-year-old marketing specialist, who earned a ₹1,00,000 Diwali bonus. Last year, he spent nearly all of it buying a new TV, clothes and festive dinners. A friend told him about the power of investing and introduced him to a smart financial rule. So, he chose to apply the famous 50-30-20 financial rule for his bonus and do things differently this year.

Just like 50-30-20 rule is usually applied to monthly salary, Rohan divided his bonus amount into three key categories that address his current happiness, past debts, and future goals.

This is a step-by-step guide of how Rohan put each step into action to beat his urge to spend: 

50% for Investment & Debt:

How he used 50% of his bonus is really important. He planned to use this amount for high-impact financial moves that generate returns or save money. 

• Paying off costly debt (The Anti-Investment): Rohan checked if he had costly high-interest credit card debt or a personal loan. If the interest rate on his loan exceeded his probable investment return (e.g., 18-15% vs 12%), it makes absolute sense to pay off debt. This move would give him an immediate guaranteed return.  
• Fund the Future (The Investment): As Rohan did not have debt, he chose to invest the complete ₹50,000 lump sum into a diversified Equity Mutual Fund for his long-term goal of retirement. Alternatively, he could have:
  • Topped up his already ongoing SIPs (aka systematic investment plan).
  • Invested in gold ETF considering how buying gold during Diwali is considered auspicious.
  • Utilized the funds to make a Systematic Transfer Plan (STP). He could have invested the full ₹50,000 into a liquid fund and then over a course of 6-months through STP, transferred Rs 8,333 from the liquid fund to an equity fund. This would have averaged his investment cost and reduced the risk from market fluctuations. 

30% on Spending (Wants): The Treat without Repentance

 This is Rohan’s guilt fund money. It is natural to have the desire to celebrate the festive season, which means spending. If Rohan will not set aside some amount from his budget towards celebrating the festive season – his entire plan might fail. When someone goes on a crash diet, it often leads to revenge eating. The same thing can happen with restrictive budget during festive season – revenge splurging, leading the failure. 

Hence, Rohan set aside ₹30,000 (30% of bonus) for festive season expenses like: 

• Shopping: New outfits, lamps, furniture.
• Gifts & Charity: Proper presents to friends and holiday contributions.
• Celebrations: Eating out, visiting to see family, and gift cost. 

By setting a separate, predetermined sum, Rohan is able to celebrate Diwali without dipping into his core finances or experiencing buyer's guilt down the line. This is his weapon to Beat Festive Inflation— knowing his maximum spending limit. 

20% for Saving & Cushion: The Emergency Fund

Having an emergency fund is super important. Rohan made sure 20% of his Diwali bonus, which is ₹20,000, is set aside for short-term financial security. 

• Rebuild Emergency Fund: Rohan made sure that his emergency fund contained 6 months' living cost. This money went directly into a high-yield savings account (or he could have invested in a liquid fund) where it is accessible yet completely safe.
• Insurance Premium: He spent a small portion to pay upcoming insurance premium (health or term life) securing his financial plan.

To really understand his investment's worth, Rohan did a quick calculation of his investment of ₹50,000 (from the 50% club).

He took a conservative 12% annual return on the ₹50,000 he invested, which is the average return long-term equity mutual funds in India usually generate. And he let the power of time do the rest of the work.

Rohan’s ₹50,000 will turn nearly ₹5 Lakhs in 20 years. His decision to invest half of his bonus, rather than spending it all, would turn that amount ten folds in 20 years – a considerable sum. This one conscious decision on a single Diwali has secured a significant portion of his retirement goal. Imagine how much wealth he will create if he continues to invest a large part of his bonus instead of splurging it into oblivion? 

Lightning a lamp only to Goddess Lakshmi on Diwali is not enough. Instead secure her presence in your life forever. The Diwali bonus is a golden opportunity — not just to celebrate the new year, but to secure your future too. Balance indulgence with discipline using the 50-30-20 rule to enjoy guilt-free festivities today while sowing the seeds of financial prosperity tomorrow.

Wishing you a very Happy Diwali!