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Effortless money
A strategy I reeeally like for accelerating money goals- because it’s effortless money- is capitalizing on little ‘windfalls.’ Too often, some ‘extra’ money comes along and we tend to want to blow it on all the things we haven’t been able to afford. And sometimes that’s the right move if that certain splurge purchase was your goal! But let’s look at it more carefully.
Think commissions, annual bonuses, annual reimbursements from FSA/HSA accounts, birthday gift money, tax refunds, and ‘extra’ paychecks for those biweekly and weekly paid workers.
Right now, we’re coming up on tax filing time and people are receiving stimulus checks for pandemic relief. Thoughtfully implemented against key money goals, bouts of extra cash can be a huge propellant towards lifelong financial success. That’s worth way more than one shopping spree, especially if you’re at the stage of forming a foundation of financial stability.
My favorite form of ‘extra’ cash
Probably my favorite ‘windfall’ to thoughtfully deploy against any financial goal is the ‘extra’ paycheck for those of us paid weekly or biweekly. These are great tools because they recur regularly, so are kind of ‘foundational’ windfalls in your annual money picture.
If you’re managing your money on a monthly basis, but you’re paid biweekly, twice a year you will receive three paychecks in a month instead of two. And if you’re paid weekly, five instead of four paychecks in a month happens four times a year, once each quarter. Woot!
These ‘extra’ paychecks are equivalent to almost 8% of your annual take-home pay (2 checks out of 26 for biweekly payroll, or 4 checks out of 52 for weekly payroll). That is money worth thinking strategically about.
Personally, we tend to rely on these extra paychecks (two from my job, two from my husband’s each year) as replenishment of the emergency or short-term layers of our savings account. However, for specific long-term financial goals that may seem insurmountable at first (e.g. a 20% house down payment?), using an ‘extra’ paycheck in combination with other strategies discussed throughout this site can get you a major jump start.
Other forms of extra money
The likely biggest windfall most average Joe’s like us get is a tax refund, so this is really one to think strategically about each year. If you are reading this in the months coming up to tax time, taking advantage of your tax refund is a great leap towards your financial goals. During COVID times, any pandemic stimulus money coming your way can be used as well.
Right now, families of four are receiving up to $2400 dollars for pandemic-related stimulus. If you haven’t been directly economically impacted by the pandemic, this money can be used towards giving to those in need and applying towards your biggest current financial challenge or goal.
Other ‘windfalls’ to consider while working yourself ahead are gift money (birthday, holidays, anniversaries…) if you’re lucky enough to have those certain check-writing family members in your life! Certainly, those gifts have a place in making purchases just for fun, but sometimes a very worthy purpose for such money may be to get you away from the spending habit and give you a burst towards breaking the paycheck to paycheck cycle, saving for your house down payment, or funding your emergency fund. No greater gift than financial freedom!
Another major one for us is reimbursement from our Dependent Care Flexible Spending Account, which is funded for $5,000 of tax free dollars towards childcare each year through my employer. If you have this amazing benefit, definitely use it! And when you draw out the reimbursement, whether every month or once a year, intentionally divert that money to your savings account to be allocated towards an intentional piece of your money pie.
What to do with extra money?
If you don’t already have a pressing goal in mind- or have so many you’re not sure where to prioritize- always start with working towards getting one month ahead of your bills (pay bills with last month’s income), funding your emergency fund, funding your big ticket expenses for the upcoming year, and then funding your big dreams and goals. These are the three layers of your savings, which you could even keep in separate savings accounts to firmly separate.
You may also have some challenges to tackle after you save for emergency and upcoming major annual expenses are covered. Planning out use of upcoming (or surprise!) windfall money is an awesome way to tackle debt, pay off those credit cards, make an extra mortgage payment each year, or fund a Roth IRA if you don’t have a retirement savings plan with your employer.
Think big, and really consider those goals that you always tell yourself you don’t have enough for. Over time, this strategic thinking will make a monumental difference in your total money picture.
In conclusion…
Any time you receive money outside of your planned monthly income, think strategically in your greater family money scheme. If you suddenly had a paid week off of work, you’d feel lousy if you spent it crashed on the couch mindlessly watching Netflix…. even if you feel like that’s all you want right now.
Same goes for your money. While there’s totally a place for personal indulgences (mindful ones!), squeezing the most big picture value out of a newfound chunk of change is usually more fulfilling no matter your financial situation.
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