What do you do with an unexpected windfall? Do you immediately start thinking about what you can do with it? Some people already know exactly where any extra money they receive will go, but many people don’t have a plan.
My wife and I received an unexpected check in the mail this week. It was a homestead property tax exemption rebate for a couple hundred dollars. Most of the time when people receive a couple hundred dollars they aren’t expecting, they immediately wonder what they should do with it. Maybe it should go toward debt, home improvements, savings, or possibly a hobby?
Any time I start thinking like that, I have to remind myself not to get carried away. I have a very good friend who is very guilty of always double counting his money, and as a result, he never has any.
What do I mean by double counting? Every time he receives any money (paycheck, gift, bonus, or unexpected windfall) he starts thinking about all the things he can do with it.
Typical conversation: “Hey, did I tell you I got a sales bonus this week? Yeah, the extra couple hundred dollars is pretty nice. I can pay car insurance for a couple months, or get a few new X-Box 360 games, or get new tires for my car, or buy the new iPhone…”
He continues to list off all the things he can do with his newfound wealth. Pretty soon he starts to believe he can do all those things with his money, when at best he could only afford to do one or two of those things. In his mind, he already allocated that money to buy those things. Because he convinced himself his little windfall was a big windfall, he ends up blowing all his money and wondering where it went.
There are other times when people need to be careful of double counting their money. It is even easier to double count your money when you receive recurring payments such as a settlement, pension, disability payment, etc. When you know you will continually receive money and no longer have to work for it, it seems like easy money and can be taken for granted. Too many people start dreaming and scheming, and lose sight of the fact that the money can only be used once.
I know many people who receive a pension from the military or other sources. When some of them start planning for their retirement, they talk about all the things they can use the money for.
Typical conversation: “Oh, I know it won’t be enough for me to live on, but an extra $1,500 every month is a nice house payment, or college tuition for my kids, or I could use it to redo the house, or…” fill in the blank.
It is easy to get carried away thinking about all the things you can do with money – especially money you weren’t expecting. But you need to take a step back and evaluate your situation. The next time you receive a windfall, large or small, take some time out to plan what you will do with it. And be careful not to double count it, or you might just spend it and not even realize it is gone.