Saturday, February 11, 2012

Where to Spend Your Windfall

I remember early in my career how wonderful it felt to get a windfall. It seemed like free money and I told myself I'd do something smart with it. And then a few days later, I would have the sad realization that I had done nothing of the sort. I had some savings but it was never ever enough to cover the big things. Nothing spells trouble like a single girl needing an auto repair. Oh I'm pretty good with the engine knowledge but I was at the mercy of the mechanics who charged an arm and a leg to do the actual repair.  Those windfalls are still important and I still try to do something smart with them. Hopefully, I'm better at it now than when I was in college.

The recent sale of a vehicle gave my family a windfall. Larger than what you'd find in your average birthday card, it wasn't enough to retire on. Still, money is money and I wanted to be wise with it.

So, here's what we did. I sat on the money for about three days and during that time, my mind went from one thing to another: Pay off some bills, put it all in the bank, go buy stuff,  don't do anything. I just let those thoughts stew around and got my priorities straight. Really, I knew all along what I'd do but it was good to take the time to realize I was on the right track Let me just throw it out there that if I had something urgent, I would not have waited. For example, I would not let the electricity get turned off just so I could think about what to do. Common sense and safety need to prevail.

Like I always do with a windfall, I took my late father's advice and bought groceries first. According to him, you can solve more problems on a full stomach. First, I stockpiled basic supplies making sure I used sales and coupons to make the money stretch even further. Then a few days later I did my regular grocery shopping. Let me clarify that I did not go overboard. You won't find 50 jars of peanut butter but I've got young kids, so there's 5 jars. I just had to suit my own comfort level.

My comfort level is what guided my next decision. I could have put the rest of the windfall toward debt reduction but instead, I sent some right on over to savings. Sure, it's going to slow down the repayment process a bit, but for those of you who have had a layoff or pay cut, you know exactly where I'm coming from. That is just the worst, sick to your stomach kind of feeling. For me, the peace of mind of having a few dollars more in the bank 'just in case' helps me sleep a little better. Peace of mind is a precious thing.

Then I tackled the debt reduction using a snowball type approach. I lined up the bills smallest to largest and started knocking them out. They aren't all paid off, but I made some headway and that is a great ego boost.

And then a funny thing happened. Doing these simple and un-original things created a little bit of financial traction and I felt smart! So....what else could I do to keep the momentum going?
I set up an automatic transfer of the savings I'd be receiving from the insurance company due to the  vehicle's sale. I'm already used to doing without that money so I chose not to let it get sucked into some mysterious financial black hole. Then we set up another automatic withdrawal which equalled half of my husband's raise. It is a small amount, to be sure ,but dimes make dollars. Not only do we get to see a little increase in our budget every month, the savings can grow one small deposit at a time. All of this had me feeling like a rock star so we tackled something I'd dreaded forever: the mail in pharmacy our insurance company wanted us to use. I balked at this because I'm old school and I want to talk to a real live person that's going to smile and say thank you. But, and this is a big but, when I was told my $25 copay was going to $87 a month unless a prescription was filled my the mail in folks, I quit balking.  After checking some of our maintenance medications like allergy meds, I realized we could save something like $300-$400 a month. Yes, you read that right. A. Month.

I'm sure there are other corners to cut, both big and small, and I intend to keep searching. The point I'm making is  one thing leads to another and I wasn't satisfied with the blessing of a windfall. I wanted to use that windfall and turn it into an even bigger blessing.

My best advice would be to take your own windfall, rather tiny or tremendous, and prioritize your To Do List. Take care of what is urgent then move on to your important needs (an oil change, filling your pantry).  And don't forget debt repayment. No one ever looked back and said, "I am sooo glad I just blew through that whole wad of cash.'

Enjoy your windfall and your smart decisions.

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