Windfall? Do I fund my true expenses or save?
Sooo, wondering what others do in case of a windfall. I have a whole load of true expenses, such as property taxes, that I am finding a small amount every month so that when the time comes the money is available.
now, let’s say I get an unexpected big tax refund. Do I get ahead of those true expenses, fund ‘em and have more spending money every month for a bit? My fear is that I then re-calibrate my spending to accommodate this extra monthly $$$, employ my yard guy to come more regularly, and when the next year comes round (with no windfall) I have a rude-awakening…
Wondering how other can stay on track with sporadic income windfalls!?
TEs really are savings goals, so it's really all the same. But if you're concerned, you should definitely make a plan for the money... let's say you are trying to fill a TE to $1000 in 5 months. So that's 200/month. If you filled that category in one fell swoop, now you've got $200 extra in your budget.
Your fear is valid, but I'd suggest setting that extra that you gained into other TEs monthly, or other savings categories like EF, Income Replacement, New car, or combination of all those and others. Don't just go out and buy an extra $200 / month worth of stuff.
I'm going to steal a great concept that somebody in the journal section said. Treat it like a "savings snowball". Just like a debt snowball, only way more fun, because you're keeping the money!!! So use it to get a jump on all the other TEs you're working on , and savings will continue to grow.
I have goals for all my categories based on my typical income. So when I get a windfall, I like to apply it to the next month to get ahead, or if already funded a month ahead, I add to my emergency fund. If all of that is already where you want it, I would make a new (temporary?) category for "Extra Yard Guy," and enjoy that green grass this summer!
Hi, Sea Green Commander
I would first use any windfall to catch myself up on any true expense that has a specific date, that is to get myself up to whatever ?/12th I need to be for how far away I am from that expense. That enabled me to get the monthly allocation to that category down to a steady 1/12th going forward.
If the known date true expenses are caught up to where they should be, I would definitely consider allocating lumps to the categories with vague timelines. These tend to be things like medical/dental, emergency fund, etc. rather than those with known timelines: Christmas, property taxes, car insurance.