(Psst: The FTC wants me to remind you that this website contains affiliate links. That means if you make a purchase from a link you click on, I might receive a small commission. This does not increase the price you’ll pay for that item nor does it decrease the awesomeness of the item. ~ Daisy)
Don’t you love it when money “falls from the sky?” That’s what I always call it when I receive a financial windfall. Money falling from the sky.
It could be a really hefty tax return, a gift, or the sale of some pricey item that has been just sitting around collecting dust. But wherever it comes from, the choice is still the same.
What should I do with all this money!?!?!?!?
Now, it’s human nature to splurge and buy all those things you’ve been denying yourself in your quest to be the Frugalest Frugalite in all the Galaxy. New clothes, beautiful furniture, a piece of jewelry – after all, you deserve a treat!
But not so fast.
You’ve also been working at paying off debt, building an emergency fund, etc. etc. et cetera. That little dose of reality was kind of a bummer, huh? Like a bucket of ice water splashed all over your celebratory plans?
Trust me when I tell you that many windfalls have slipped through my fingers in the past and I have sincerely regretted it. I don’t want you to regret it, so learn from my mistakes back in my spendy days!
Here’s the financial windfall plan.
First, don’t do anything immediately. You are going to feel so bad if you go and blow the entire financial windfall on a new living room set and then the bills come in and you wish you had paid off your credit card instead.
Then, break it up by percentages. My usual split is 10/50/40. Here’s the breakdown:
Put aside a percentage of the financial windfall for fun stuff. For me, it’s usually 10% and with that money, I can buy anything I want, no matter how frivolous.
One of my favorite ways to spend “free” money is on an adventure. I’m more into experiences than “stuff” these days, especially after selling nearly everything I owned. The kids will remember that time you went to the mountains a lot more fondly than that time you bought them yet another video game.
And I’m serious about this. Unless you are in the direst of straits, enjoy life a little bit. Frugality doesn’t mean you never, ever do or purchase anything fun and you just grimly pay off bills and then sock away cash until you die.
Add some to your emergency fund. I usually add 50% of any windfall straight into the fund. There have been so many times that I’ve been glad to have an emergency fund. It’s saved my bacon at least 20 times that I can think of right off the top of my head.
Then there are a couple of options for the remaining 40%.
- Check your snowball list. (You know, the one where you’re paying off all your debt.) Are there some small debts you can get rid of completely?
- Is there a bulk purchase you’ve been wanting to make? One that would save you a fair bit of money if you could pay for it all upfront? A side of beef or your car insurance for the next 6 months?
- Is there a repair you’ve been putting off? Most repairs, whether they are to cars or homes, save you more money in the long run. If you wait, you risk other systems being affected by the broken item. Then, when it completely fails and you have no choice but to repair it, your bill is far higher. Put new tires on the car, get that rattle-y refrigerator fixed, or patch that leak on the roof.
Don’t feel guilty.
Those are just my examples. You’re free, of course, to split this up however you want. But – and this may be surprising – I strongly urge you to put aside a little bit of money for fun. You work hard and you deserve a treat now and then. Having a little bit extra to enjoy from time to time will help you to stay motivated. You aren’t a Spartan and life is about living. Just don’t go overboard and blow the whole chunk of money!
Sometimes it can be difficult to switch from uber-frugality to a splurge without feeling guilty. If that’s the case, you need to think about your relationship with money.
Just like emotional overspending isn’t healthy, guilt about enjoyable spending isn’t healthy either. I have found that guilt is especially prevalent if I’ve gone through an extended period of very hard times.
If you find yourself in that situation, then your splurge might be something that others would consider practical that you haven’t been able to afford. Perhaps steak instead of hamburger meat, a meal out, or some snack foods you wouldn’t normally purchase. It could mean some new shoes for work even though your old ones are still hanging on. Perhaps you’ll be more comfortable spending 5% instead of 10%
What would you do with an unexpected financial windfall?
What do you do when money “falls from the sky?” Do you treat yourself, use it only for practical purposes, or divvy it up? What do you feel is the most responsible way to handle an unexpected financial windfall? Do you struggle with feeling guilty when you splurge, even if it’s planned?
Let’s talk about getting an unexpected financial windfall in the comments.