When money appears that isn't a regular part of your budget, it's easy to let it slip through your fingers. Avoid wasting your windfalls by establishing a purpose ahead of time.
Photo by stopnlook.
Although it isn't every day—or decade for that matter—you usually run into a huge windfall, throughout the year we experience little ones: tax returns, bonuses at work, extra cash from garage sales, and so on.
The best way to prevent those windfalls from vanishing on frivolous or unimportant purchase is to have a plan in place before the money arrives. At the financial blog Get Rich Slowly, they suggest a two-pronged approach involving having a concrete goal that money is funneled towards with some of it allocated as "blow" money:
Allocate a pre-determined percentage to "blow" money. This system is commonly used with larger windfalls (inheritance, sales of major assets, etc…), but can be applied to the smaller ones, as well. For example, you may choose to allocate 50% (with smaller windfalls) of any non-budgeted income to be spent as "blow" money, while they other 50% is either funneled into the normal budget or put towards a specific goal. This tactic also can motivate you to find more ways of generating income. After all, the more side income you bring in the higher the percentage you get to apply towards personal wants.
Of course if the goal you're saving towards is one your excited about you may allocate significantly more than 50 per cent towards it, the important part however is that you have a concrete plan for dealing with unexpected income. Check out the full article at Get Rich Slowly for more information.
Have your own method for blending windfall money into your budget? Let's hear about it in the comments.
Making the Most of Small Windfalls [Get Rich Slowly]