Money chunking: what’s your style?
March 31, 2011
Let’s talk bonuses, windfalls, and irregular income.
Say you have the occasional gob of money come your way every so often that isn’t part of your usual cash flow. Birthday money, Lunar new year money, an annual work bonus, work overtime, what have you. The size of it doesn’t matter so much as the definition of money that is not part of your usual income.
Is that money budgeted into your cash flow in some way? Does it get directed into your emergency savings, towards paying down debt or into bigger savings goals? Or does it get spent on a treat? Does it depend on the size, timing or something else entirely? Do you plan for it, in the case of annual events?
I earned a modest bump in income outside of my regular income this year, and after taxes:
1. I put the first $700 in the insurance fund. It’s been looking bare and I know the auto insurance and renters will be coming due in April.
2. The second $700 was my first deposit into the wedding fund.
Thinking back, my modus operandi has pretty much always sent windfalls into existing savings funds because that brought me the most joy. Or satisfaction, really.
It mostly depends on how my financial situation looks. First I put all found money toward our ROTHs. Then I work on the EF. But if both are looking healthy, I may take 10-20% and spend it on fun stuff right now.
I used to be a total treat myself person, but now it all goes to debt. I’ll probably stick to this, though BF is most to bills but some sort of treat too…if we ever combine finances we’ll have to duke it out. 🙂
We put it straight into EF for future mortgage payoff!
I have a mini windfall coming up, and I’ve been mulling over this topic for the last week! I think I’ve settled on splitting it between getting a new bra (wires are poking on a couple of mine), and bulking up my emergency savings.
It gets put in slush (which is everything that’s leftover after bills, retirement and college saving etc.). If slush is bigger than one month’s expenses when I’m not saving for summer or 4 months expenses when I am saving for summer then I put everything above that point someplace else. Currently that’s in the mortgage. Previously that was in the stock market.
When DH has a personal windfall, he decides what to do with it.
Totally depends on the source and the amount. If it’s the nominal amount of cash my grandmother sends me for Christmas? I buy myself something lovely with it, because that’s exactly what she’d want me to do.
But if it’s a larger amount, of if it’s related to work, or if it’s simply a tax refund, I put the vast majority of it in savings and give myself maybe $100 to do something fun with.
My husband on the other hand wants to head straight to REI.
Depends. 🙂 If it’s $20 or so, that becomes a movie night for me and my sweetie. If it’s more than that, usually it gets put to bills or debt or whatever is most pressing at the moment. However, every year on my birthday my MIL sends me $50 with the instruction to “buy something pretty for yourself” … so that’s what I do. I think she’d be upset and hurt if I spent her birthday gift on the electric bill or whatever.
In the past any extra money is spent on treats and nonsense LOL.. now I’m more conscious with my money so any extra income/bonus gets put away as if it was never there.
My bonuses were typically used with travel and/or savings in mind. Tax refund was for LASIK. Smaller items like refund checks from the doctor, surveys, class action suits (from mishandled sensitive info usually <$50) now gets directed to my IRA.
I don’t really budget windfalls into my cashflow (unless I’m really strapped for cash.) I usually consider it as a BIG snowflake. I put it where I think it’ll be the best for me… It’s usually split between giving some to my parents, some for savings, some for splurging.
Currently it tends to go toward debt as we work to get out of debt. Eventually though I think I would put it into a savings fund for a nice vacation with the family.
I save it into a big pot called “savings” and kind of leave it…. 🙂
I’ve just sold my car. The money I got for it plus what I’m not paying out for insurance, taxes, etc. are a lump sum I wouldn’t normally have, though I intended to ditch the car, so it’s not unexpected. I’m just sitting on it right now, as I don’t need anymore cash savings and I don’t want to put more into the stock market than I’m already drip feeding. We are doing some spring cleaning around here and I’m taking stock of what things need replaced…the computer might be high up on the list. We’ll see…
It all goes to student loans and will until they are paid off in….2014!!!! Oh I look forward to the day.
Otherwise I would put a percentage in savings and a percentage in the travel fund, as traveling is super important to me and can’t wait until I can do some more of it with the bf.
Usually I try to put as much as possible into savings.
This year (and, with any luck, part of next year) I’ll be using the remains of the 14 grand I’d put aside before the layoff as an emergency fund to live on, since there’s plenty in my IRAs and brokerage accounts to fall back on in a real emergency. This uses post-tax money to fund the forced “retirement” instead of my having to take taxable drawdowns from retirement savings.
So the first windfall, about $2500 net for this year’s installment of the amount the state owes me for unused sick time, went partially to finish funding my Roth IRA for 2011; the rest of it went into what I’m calling the “survival fund” — the money I’m living on this year.
The unexpected tax refund also went straight to the survival fund; however, I may have to use some of that for some pending expenses.
The $700 in additional reimbursements from the insurance company: survival fund. I’ve already paid those costs out of short-term savings, which eventually will grow back with routine monthly deposits, so the insurance money can be applied toward keeping me going another few weeks.
Around here, small windfalls almost never happen. If they do, they get diddled away.
I don’t really factor it into my budget. I pretty much see if I have any CC debt, pay that off, and then send the rest to savings. This happens to me on a weekly basis as I’m hourly.
TRAVEL!! Any extra income I recieve currently goes to my travel fund along with my tax refund this year.
In previous years it went straight to the student loans.
Back in the day, it was 100% debt payment for me. People would beg me to use windfall money on something fun, but it was more fun – to me at least – to watch my debt total decrease.
Now it’s savings. I was given a small bonus recently for being the referee for the Biggest Loser Challenge at work, and it went straight to savings. Especially when it’s unexpected like that, it’s easy to put it away. I won’t miss it like I might miss a bonus I expected.