When you’re the recipient of an unexpected windfall, you might have one of two typical reactions. One is to set the windfall aside as “extra” and use it for a big splurge. The other is to absorb it into your normal spending and not really keep track of it specifically, but let it add to whatever budgeting plan you already have set up.
I don’t feel a windfall is an excuse to splurge, but I do ascribe to the first camp in part. I think a windfall should be looked at as extra and kept out of your day to day spending. Too many small windfalls in the past for our family got deposited into our checking account and then never heard from again. Like a raise, we subtly adjusted to lifestyle inflation and absorbed the extra money. But no more. For the past year, our windfalls have been counted and used to make a difference instead of simply keeping us afloat.
Use windfalls to jumpstart your financial goals. Don’t treat it as budgeted money and add it here and there to your budget to pad it for a month or two – make it special and make it count. No matter what your primary financial goal is, use the windfall to jumpstart it. Ours right now is of course debt reduction, but no matter what that goal is, a windfall can give the motivation and ability to achieve yours. Is your goal retirement savings? An emergency fund? Or even a family vacation? We all have our own personal priorities based on where we are in life and what our financial goals are. An influx of a thousand, a few thousand, or even a hundred dollars into your primary financial goal can make it feel that much more achievable, instantly. After all, a windfall is simply a snowflake that grew.
Why do I feel so strongly about this? Because I spent far too long not feeling the rewards of having a windfall happen. Our windfalls somehow just got absorbed into our day to day life and a few months later, it was like it never happened and we had little to show for it. A windfall should feel rewarding, no matter what it is being used for. Reward yourself today with a responsible choice that will kickstart your most important financial goals and put your motivation into overdrive.