Periodically I get a great call or email from a happy client that goes something along the lines of, “I just received a large bonus for my hard work or just came into some unexpected cash. What should I do with it?” These aren’t the life changing lump sum types like winning the lottery or selling your company after building it over four decades. These lumps sums are the type where they are significant sums that come up from time to time that should not be wasted foolishly.
“I spent most of my money on sex, drugs and rock n’ roll. The rest I just wasted.”
– Unknown
I’d like to share my methodology that works for me which is what I call,
“Third-third-third.”
- One third is SAVED for your long term financial future and wealth plan (like retirement). This comes right off the top to ensure that you aren’t going to look back at some point in the future and say, “Gosh, I can’t believe I have nothing to show for that chunk of money that fell into my lap.” Keep in mind, saving for your future doesn’t mean you never spend it. It just means that you should be able to spend even more down the road if invested prudently when your earnings may not be where they are today through earned and active income.
- One third is used to PAY OFF DEBT. Let’s face it. There’s a good chance that you’ve already spent money on something that stretched you financially (house, cars, credit cards, student loans). Lower your financial burden by lumping off a good chunk of those previous expenditures while you have an easy layup. Paying off large chunks of debt is like lifting a big weight off your shoulder. It will help you sleep better at night. Show me a person who is debt free in life and I’ll show you a person who sleeps well at night.
- One third is used to ENJOY in the here and now. This third is for your discretion. Spend away! It could be towards a new toy. It could be for a vacation. Maybe a new kitchen. I always say you can’t go wrong with some new fishing equipment! Further, you don’t have to feel an ounce of guilt spending money on something out of the ordinary because you know you were quite prudent and responsible for the other two-thirds of the financial windfall.
“If everybody had their priorities straight, there would be a shortage of fishing poles.”
– Paul Kindzia
Trivia question – What happens if you come into a windfall and you are already debt free?
Answer – Then you have even more to spend lavishly on yourself. At that point, you deserve it!