Unexpected money is fun and exciting – a bonus at work, more taxes back then you thought, even a surprise $50 in a birthday card. However, most of us don’t plan for surprise income which is a problem. No matter how you look at it, incoming cash is income. You can use it to live on or blow it. Obviously it’s better to have a solid surprise income plan in place because blowing money rarely feels good for the long term, but knowing you have back-up funds and a savings plan does feel excellent.
Get Rich Slowly has two suggestions that should work for everyone…
“Choose one specific, tangible goal to â€ścatchâ€ť all extra income.” If you choose goals ahead of time you’ll be less liekly to waste the surprise money you get. This obviously works better if you choose a goal you’re invested in such as paying off your home or building a family vacation fund. Don’t be vague such as, “Extra money will go to bills” which yeah it might, but normal money goes there too. Make a plan so that if your bills are paid when surprise cash flows in you still save most of it.
“Allocate a pre-determined percentage to â€śblowâ€ť money.” This helps you feel more satisfied without blowing a lot of cash. If you get a large bonus you may want to allocate about 30% to blow and the rest to save. For a smaller windfall, you might want to break it up more evenly – say 50/50. Everyone, even thrifty people need to blow some cash once in a while and this is a smarter way to do so.
What do you do with unexpected money?
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