Posted: June 14th, 2011 | Author: Joe | Filed under: spending | Tags: money, news, Robert Adams, windfall | 3 Comments »
Pop Quiz: You walk up to the ATM to get some fast cash for a burrito, and almost step on a bag of cash – $17k in cash. What do you do?
I’d like to say that I’d find a way to return the money, like Robert Adams did, but I honestly don’t know if I would. $1 million is definitely a game changer, but it’s also easy to decide what to do with (as evidenced by this post). But my wife and I were just discussing the other day about how something as simple as an extra $1,000 a month would change our life significantly. 17 grand would go a long way to easy many of my money worries…
- I could pay off my car loan and still have $10,000 left over…
- I could put that extra $10k in savings for my next car and never need another car loan again…
- I could finish the unfinished room on the 2nd floor of my house, increasing the number of bedrooms…
- I could fully fund my IRA for the year, and have enough left over for the next two years and pocket the interest…
- I could pay off my student loans, and still have enough left over to almost pay off the family car…
- I could take my wife and kids to Disney land…
- I could make a nice donation to my favorite charity…
- I could buy a new home entertainment system….
- I could hire a maid and make my wife’s life a lot easier…
Well, I could go on… but this little dream is moot because I probably would hand the money over. The way I see it, I’d have to sleep sometime and when I did, my conscience would gnaw away at me.
For the record, if I suddenly came into $17,000 I didn’t have previously, I’d probably pay off the family car and bank the rest for my next car since it’s getting a little shaky these days.. then I’d hire a maid. 
But what about you?
Would you return the money?
Forgetting about the source of the money for a minute, would an extra $17,000 change your life in any way?
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Posted: April 4th, 2008 | Author: Joe | Filed under: Saving, Tips | Tags: Budgeting, money, Saving, spending, windfall | 3 Comments »
Reading Four Ways I Upgraded Out Of My Raises at Free From Broke, got me thinking about how our spending tends to grow into our income. I’ve known about that concept for a while now and have fought hard to resist it, but I’ve had a realization recently that makes this even easier. I’d like to share it with you, dear reader.
With all the talk about the economic stimulus payments that will be issued in the next few months, coupled with my own bonus and raise at work, I started to see things in a different light. Call it the reverse of the Pay Yourself First principal. The idea is a simple one – Spend no more than 15% of your windfall and save or invest the rest.
How It Works.
By spending 15%, you get the psychological effect of (short term) reward while still maintaining 85% of your found money to put to work in a high yield, online savings account or pay down debt or invest for the long haul (the REAL reward). It’s instant gratification AND long term reward – the best of both worlds.
The psychological factor is the key. I’ve been very disciplined in the past – I would jack up my automatic savings plan to match the amount of my raise, and I found is that this would work according to plan for a few pay periods. The problem for me was that it worked too well. The whole point was to act financially like I hadn’t gotten a raise and I’d be that much closer to my goals. The reality was that my financial self was more than happy, but the emotional (or human) side of me felt somewhat depressed that I hadn’t seen any of this supposed reward.
The Result Was Self-Sabotage.
I would over compensate by spending more. I spent less than my increase, but that amount would still be enough to cause a shortfall that would wreck all kinds of havoc on automatic money transfers and the like. In the worst case, it would cascade into a bank over draft fee at some point thus costing a lot more than the proposed 15%, and delaying the very financial goals that were supposed to have been reached quicker as a result of the raise!
You may think this 15% factor is not enough, or that you’d need to have a windfall of a couple hundred dollars at least, but that’s not really true. Sure, it’s a lot nicer when you’ve got a $1,200 stimulus check, but even small amounts work. For example, say you sold some “junk” you found in the closet on eBay or Amazon for $50. That 15% comes out to $7.50. Not much you say? Ah, but it’s still a cup of coffee and bagel on your way to work, or a discount CD, DVD or book. And the best part is you still have over $40 that you didn’t have before.
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