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What Should I Do With Extra Money?

One day I found some extra money in a pair of jeans that I had not worn in ages. I stuck my fingers into the pocket and felt what I thought was an piece of tissue. I pulled “it” out of the pocket with every intention of throwing it away. But alas! It was not tissue, but a twenty dollar bill! No words can describe how good it feels to find an extra bit of money stashed away in a forgotten spot. And it always seems as though the money comes up when you’re really in a bind. Unfortunately, this does not happen often to me too often because my current budgeting and money parcelling habits don’t allow me to enjoy such surprises.

But what if you get a really big windfall? Suppose the tax man made a mistake and you ended up with a $1000 refund instead of $10? Or if your long lost Great-Great-Aunt Edna died and left you $10,000? I know that some people would take that money and blow it one go which is not ideal, in my opinion. Jen over at Master the Art of Saving has a very structured plan which I really admire. She allocates her extra money based on what her readers say! And her options which are always sensible, include contributing to savings, paying off a credit card and contributing to her Roth IRA.

If I had to get extra money (provided that it was a large sum, say over $5,000) I would:

  • Save a portion
  • Contribute to my emergency fund
  • Pay off or pay down any debt
  • Give some to my family
  • Donate to charity
  • Build my businesses

Even if it was a small sum, I would still save a portion. There is something about saving money that gets me excited. Call me weird, but it does not feel quite right to spend all of my money and not save anything. I’ve read many blogs and the advice given by experienced bloggers and their readers, is usually a mixture of ideas which usually includes saving and spending portions of the money. I would add to this and say that you should take your financial goals into consideration and let them be the driving force behind your decision.