June 18th, 2012

What To Do With “Windfall” Cash

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**Today’s guest post is contributed by Megan Taylor.**

No matter how little I’ve had, there have always been times in my life when I’ll find myself with a little extra cash. The strangest was a literal “Pay it forward” moment in college when a guy in a business suit walked up to me on the street, handed me twenty dollars, said “Pay it forward,” and walked away.

So, windfalls happen. Christmases, birthdays, random guys on the street, gift cards, raffle drawings, extra paychecks, bonus paychecks, etc. But is that unexpected, unbudgeted for cash “free” money, to spend as you want? Or should it be used for something “sensible”?

When I was younger, the moment I got “extra” money, I considered it a free pass to buy whatever I wanted. I would suddenly remember the nine hundred things I wanted, and before I knew it–*POOF*–it was gone. And I often didn’t have anything really to show for it, which was kind of frustrating.

As I’ve gotten older and (theoretically) wiser, I’ve figured out a better plan. My advice now?

SAVE IT. Hold on to it. Put it in timeout, if you will, until you can consider what you want to do with it.

Where I used to spend it immediately, now, if I get unexpected extra cash, its first stop is always my savings account, where I leave it alone for 30 days.

During those 30 days, I make a list of the things that I’d like to do with the money, whether it’s treat myself to a nice dinner, or buy those new shoes I’ve been eyeing, or use it for something practical like paying down debt. I can wish and dream and ponder all I want, but I can’t spend any of that money until the 30 days are up.

And the funny thing is, by the end of that self-imposed “timeout” period, I often find that I don’t need half (or any) of the things I was dying to buy when I first got the extra money. When I first implemented this plan, I usually couldn’t wait to spend the money as soon as the 30 days were up. Anymore, though, I usually leave the money in savings to accumulate toward a bigger goal or purchase down the road. Talk about progress.

(As far as gift cards go, I usually leave them at home in a designated place with the date of receipt written on them. I can go to the store or look online, but I can’t spend that gift card until 30 days have passed and I’m sure that what I’m using it for is really what I want.)

So, if you’re like me, and you often find yourself wondering where that $40 you got from Aunt Linda for your birthday disappeared to, try putting your money in timeout for a month, and see if it helps.

Megan works in financial literacy education for the state of Colorado, and is about to start a three year educational journey to earn a Master’s degree in Accounting. She plans to become a CPA, and help small businesses better manage their money. She blogs at TheFinanceGeek.com and Becoming A CPA.

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  1. Excellent advice. Putting windfalls in a savings account for a few weeks will help you limit the temptation to spend it right away. It gives you time to think through all the possible uses for the money, eliminate most of them, and find the single best use for it.

    Ryan at 2:08 pm on June 18, 2012
  2. What would a person do with $20 from a stranger if they told them to pay it forward …. would you pass it to someone else and say the same . I would feel guilty spending it .I ask someone and they said they do not know what they would do .

    Joy at 12:14 pm on July 25, 2012
  3. Great point about waiting 30 days. I’ve done something similar recently, although I was actually forced to haha. I was getting a check from the estate of a recently deceased family member (unexpected) and I had a million ideas of how I wanted to spend it. It was spent in my mind before I got it. But, after waiting to get the check, then having to wait to cash it and get it cleared, I realized that most of the things I wanted to do – I no longer wanted to do them.

    Clint Lenard at 3:31 pm on August 22, 2012
  4. @Joy, you’re assuming that giving people money is the only possible kind deed. The man decided to do a good deed. Just because that deed was monetary doesn’t mean you have to pass on the SAME good deed. If you need the $20 when it’s given to you in that case, then clearly the man picked the right person… thank him, use the money for a good purpose, then find an equally kind way to pass forward the good deed. Perhaps you have some other possession you don’t need but another person could use, or you have some time to help someone in need on the side of the road, etc. Good deeds come in many flavors, and all of them taste wonderful.

    As for the 30 days… I agree it’s an excellent idea. Give yourself a chance to let temptation subside and let the monetary concerns that have been bothering you take over… putting the money towards a bill/debt/repair you’ve been worrying about for weeks or months will provide FAR more long-term satisfaction (through stress relief alone) than any tempting impulse purchase, a fact you’ll quickly remember once you stop worrying about spending the money.

    Jay at 1:44 pm on September 11, 2012

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