Come into Money Recently? Spend it Wisely…
by April Lewis-Parks
There are few things better than getting called into your boss’s office and given an unexpected bonus or receiving a large tax refund from Uncle Sam. If you’re like most people, you may immediately start envisioning buying that new dress that is out of your budget or using the cash to start planning a mid-year vacation.
Before you blow all your cash, however, it’s also a good idea to listen to that annoying voice in the back of your head that is urging you to do something positive with your windfall. When you receive a surprise influx of cash, spending it on luxuries may be tempting, but consider a few other ways to use some of it.
1. Be done with your credit card balance once and for all
If you’re a few payments away from finally paying off your credit card bill, using a bonus to eliminate your balance can put you in a better financial position. You will not only rid yourself of a monthly payment, but you can apply the money you were spending on your debt to other areas, such as savings, retirement, a vacation or holiday shopping.
2. Protect yourself from emergencies
If you regularly contribute to your savings account each pay period, you are in a great position to build a healthy cash cushion. But are equally diligent about contributing to an emergency savings fund? Building a reserve of cash that can be used when your computer crashes, your car breaks down or you’re hit with a sudden expense can help you avoid turning to credit or savings to cover the costs.
3. Take one step closer toward a financial goal
If you’re saving for a down payment on a home, trying to max out your IRA contributions or putting money away for a new car, a cash windfall can help you reach those goals. Keep in mind that you don’t have to devote the entire amount to one goal. You might decide that buying a new car is in your immediate future and place a larger percentage toward that goal. The rest may be divided up and used for other spending categories.
While the urge to spend extra money may be strong, remember that for each step you take toward financial freedom, you will ultimately have more flexibility over how you spend your money in the future.