Like Clark Griswold in the classic holiday film “Christmas Vacation,” you’ve gotten used to getting a “Jelly of the Month Club” from your boss as a reward for your work. But this year, your company did better than expected, and to your surprise, you got an end of the year cash bonus instead! Woohoo, great job!
So, what do you do when you receive unexpected money; i.e., money that is outside of your typical monthly income? Is your first thought to put it away for a rainy day?
Extra rewards for your hard work can appear in a number of ways; and typically, all of them exclude a jelly subscription. It could be in the form of a tax refund, a raise at work, extra tips, a holiday bonus, or stimulus money!
While that extra cash may be burning a hole in your pocket, consider saving it instead of spending it. The smart savings choice is to stop yourself from blowing it all at once, and instead, place that money into a rainy-day fund.
Move money from checking to savings
When we get extra income, most of the time it is deposited directly into our checking accounts. Checking accounts are great for short term spending, but if you’re looking to save for the long term, it’s better to place that money into a savings account. Use online banking* to easily transfer money from your checking to a savings account. If you have automatic recurring transfers set up, you can also consider increasing the amount you transfer from your checking to savings to reflect a growth in your income, such as a raise at work.
Use it to pay extra on bills
If you’ve already created a plan for paying off your bills, then receiving extra income can be a great way to quickly pay off those expenses. For example, if you usually plan to spend $800 a month on items like rent, utilities, and food, and you receive an extra $500 that month, you can use that extra income to pay more toward what you owe. Put a little more toward your car payment or student loan debt. Anytime you can get ahead of your bills, you’re investing in a healthier financial future.
Add it to a specific fund
Saving for a new vehicle or a down payment on your first house? If you recently came into possession of extra income, then take that unexpected money and transfer it into a special savings bucket. Whether it’s that trip to Hawaii you’ve always dreamed of, or a college fund for your kids, placing your savings into intentional buckets makes it easier to save it, forget it, and access it when the time comes for you to use it.
You can’t predict when extra cash will flow your way but being ready to stash it when it does arrive will better prepare you for the future!
*Online banking requires enrollment.
