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One forgotten secret why you need to budget money windfalls


The 10th creative secret to surviving when money is tight is…

You have been working so hard for so long to successfully manage your money during this period of not enough funds and too many bills, when all the sudden you receive a large windfall of money! Yes! Life is good!

Regardless of where the money comes from, the first thought tends to be one of huge relief! You have extra money and now your finances aren’t going to be as tight, because your money problems are over.

The second thought is wanting to spend money since you have been telling yourself no on so many things. You can now afford to splurge and you start making purchases.

Whoa! Hold on! Don’t throw out your frugal habits just yet!

Did extra money come your way? Here is one secret why you should budget that money (hint: you don't want the money to grow wings...)

In my guest post at Cents and Order, 9 creative secrets to survive when money is tight, I shared some tips I have learned to successfully manage money when you don’t have much, but something was missing from the list. I mulled it over for months. 

When Kristina approached me with the idea to write a follow up to the 9 creative secrets, since the post was blowing up on Pinterest (3.3K pins!!) and was generating lots of traffic, I agreed.

The 10th secret was now obvious. 

9 creative secrets to survive when money is tight

  1. Remember this is a season in life
  2. Set up a monthly budget
  3. Cut expenses one at a time
  4. Focus on paying off only one debt
  5. Look for creative ways to earn more income
  6. Take some time off from worrying about money
  7. Plan out regular expenses 
  8. Reward your wins
  9. Make your money goals visual

Secret #10 is... 

10. Budget windfalls of extra money

When you come into some extra money, from paying off a debt, working another job, or a tax return, it is vital to relax your death grip on every dollar that you spend very, very slowly.
There is so much pressure to manage every dollar with purpose when you have to because of struggling finances and it is so tempting to spend when you come into some extra money. You have been holding off on so many purchases for so long and you want to reward yourself for doing a good job with money.

Not all money windfalls are permanent. 

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Not all windfalls are a permanent increase in your income and relief spending can get you into trouble, even reversing some of the progress you have fought so hard to accomplish. 

What do you mean? 

Let me share a couple of personal examples. 

One way I have really struggled since becoming debt free is with the desire to be very generous, since I have the money because I don’t have any debt. While my heart is in the right place, there have been many times, especially Christmas, where I have spent too much money on gifts and then had to scramble to juggle my normal bills. The joy of giving is squashed by the stress that follows. 

Another time, I was convinced a rather large expense would be out of my life for good in the next couple of months and planned a big trip with my hubby, which was a lot more than we normally spent on vacations.

My reasoning was that we would now have a ‘raise’ due to the windfall of money which wouldn’t be going towards this expense any more. By the time, I realized that our plans had changed and this expense was sticking around for another few years, it was too late to back out of our trip. 

We took the trip, but I was worried about money the entire time and had to wipe out my savings upon returning to come up with the money by the due date. I spent many months struggling to recover from the cockiness of the decision to plan an expensive trip before knowing for sure we had the money. 

Here is how to budget windfalls of extra money successfully

  • Plan a certain amount of money to spend on fun

Rewarding yourself slightly is fine, but should be a small amount of money in relation to the entire windfall. You can give a certain amount to each person in your family to spend as they wish or chose an experience to do together as a family, no need to track this money!

  • Park some money in savings

Extra money lying around is never a bad idea! There are always different things to save money for and if this windfall is only temporary then you will have a little more cushion when life becomes tight again. If the increase in money is a permanent, you can always spend the money later if you want.

  • Be generous

When money is tight, it is so hard to be generous. Generosity changes people for the better. As a Christian, I give a tenth of any income I receive, so I give off of any windfalls as well. Often we want to give, but can’t when we’re struggling.  Now, you have the opportunity to be generous and can do so with whatever is closest to your heart.

  • Pay an upcoming bill ahead of time

Again, you will never lose if you pay some bills ahead of time. One example could be putting all the money for your car insurance into savings so when it’s time to renew your policy, you can pay for 6 months at a time, thus saving money in the long run. Do you have a car repair that you have been putting off? Use a percentage of your windfall to get that taken care of.

  • Pay off a debt

Do you have a debt which can be paid off in full with your new found money? Pay it off! You will feel a huge relief and will have continued motivation to work on the rest of your debts. Plus, if money gets tight again, you will have one less payment to manage.

  • Act like you don’t have the increase

Wait a few months and build up some extra savings before reworking your budget when it seems as though your windfall is a permanent change. Just in case something happens and you are unable to count on the extra money for some reason. When you do adjust your budget to match the new income level, keep your new lifestyle as low as possible so you can use most of the additional amount to get out of debt or to build savings/investments.

Based on the windfall amount, you can either divide it up by percentages or dollar amounts. The point is to be mindful about where you tell your extra windfall cash to go and to proceed with caution until your situation has proven this windfall is permanent.
Don’t forget all the frugal money habits you have developed throughout the season when money was tight. Windfalls of money are often temporary and when you spend freely, as a relief after having to counting every penny, you will reverse some of the progress you have made.

Would you like to read original article, 9 creative secrets to surviving when money is tight

What would you do with an extra windfall of money? 

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About the Author

Hi! I'm Charissa. I was able to pay off all my debt, pay cash for my husband's education, and build up my savings-all because of using a budget. I love to share all the budgeting tips I've learned with you so you can have a successful budget too! Read more...

Kristina-Cents and Order
2015-11-02 08:25:54
Great follow up Charissa! Budgeting that extra money can make a huge difference in your financial situation. It can be tempting to spend that tax refund or Christmas bonus, but that money can put a huge debt in your debt payoff or help build your emergency fund. Thanks for the follow up post!
2015-11-05 15:08:18
Great tips! I threw almost my entire tax refund toward my debt this year and had no hesitation about it. I know this is only a season in my life right now and that money will come back tenfold.
2015-11-02 20:30:58
Kristina, thank you very much for suggesting a follow up post!! It's always a pleasure working with you! It's hard when you have been so careful with money to not want to spend because you deserve a reward, but yes that extra money can really go along way if you are careful to plan where it is going.
2015-11-05 21:43:26
That's awesome Chonce! What a great feeling to get rid of a large chunk of debt all at once!
2016-12-12 19:12:12
Miranda, wow, that was a great windfall! That is an excellent point about putting away money for taxes. I do think you can certainly enjoy some of your windfall, but the key is to plan a specific amount or percentage to enjoy worry free, that way the enjoyment doesn't come back to haunt you as you said.
2016-12-10 14:51:15
We got an unexpected windfall last year right as we were in the process of buying or first home. It was so significant that we were able to use it to boost our down payment, add a couple essential upgrades (such as a fence) and put some away for savings. It was a great blessing, but we also did some foolishness with it that is coming back to haunt us now. I would also mention that if your windfall is over a couple thousand dollars, be sure to put some aside for taxes. In some cases (like ours) that money could bump you into the next tax bracket or cause you to pay taxes on it!