Recently we came into a little extra money. Not a lot, just an extra $2000 that we weren’t planning on receiving.
You’d think it would be easy to decide what to do with it, but it has been surprisingly difficult.
The obvious option is to throw it all towards our car loan, since that’s the debt we’re aiming to kill as of now. But the problem with throwing this windfall all at one debt, is that there’s nothing to show for in the end. It kind of feels like we’re throwing it into a deep, dark hole. Well, I guess we sort of are, eh?
Part of me thinks we should use this unexpected money to chip away at some of our other goals instead.
You see, a few months ago, after we paid off our credit card debt, we realized we were now free to start daydreaming about something other than throwing money at Mastercard. A lot of goals were born that day, not only goals to tackle our other debt, but also ones for building our stability for the future.
The 50/50 Rule
In the early days of our marriage we came up with a simple 50/50 rule for windfall monies. At the time were focusing on two goals: 1) building an emergency fund, and 2) paying off debt. So anytime one of us would get a bonus or an unexpected large sum of money, 50% would go to the savings fund, and 50% would go to the credit card debt.
This method worked quite well for our states of mind, since we felt we were making progress on both goals at the same time.
And after our emergency fund goal was met, we’d still use the 50/50 rule with our windfall money, putting half towards debt and half towards another need, or sometimes a want. It’s our way of staying balanced so we feel like we’re moving forward in other areas of life, whilst paying off debt.
So we’re thinking the 50/50 rule will do us well with this latest sum too.
But if $1000 of our windfall is going towards our car loan, what to do with the other $1000?
- Put it into a savings account for our 10th anniversary trip. We never took an official honeymoon, and we’ve dreamed of going someplace tropical for our 10th, which is just two years away. A-Rob are you okay with tropical? I realize as I write this that we’ve never actually discussed where we’ll go. Now you know my vote.
- Start our first IRA account. We hear that’s what all the cool finance kids are doing these days.
- Purchase a CD, the investment kind that is, and start getting our money to work for us, even if in small amounts.
- Start a 529 fund for our kids’ college. We currently have zero saved for this event that will occur in t-minus eleven years.
- Start saving for the day we will eventually need to replace my car (the one with the hooptie tendencies).
- Start saving for the day we will eventually need to buy a new house.
- This may sound trite, but I am in dire need of some new work clothing. Staring at my small collection of tired tops every morning in hopes that some magical new outfit will appear isn’t working anymore.
- Since we’re going for trite, we could also use the money to buy a new chair. The one in our living room is a cheap Ikea one that sends our guests flying whenever they sit in it. And it sits low, as does our couch, so friends and family members with knee problems have nowhere to sit comfortably in our home, and that just makes me feel inhospitable.
- Or I could invest in myself and buy a plane ticket to Chicago for the Financial Blogger Conference. ;)
I’m sure I could come up with at least a half a dozen more uses for this money, but you get the gist. We have too many pots to fill, and not enough porridge. I love goals, but it can be hard to pursue all of them with limited resources.
What would you do with an unexpected $2000? Would you throw it all toward debt? What do you think of our 50/50 rule?