Have you ever noticed that as soon as you have a good chunk of money saved, things happen that cause you to spend it? I started this day excited. I checked my banking accounts to find that my income tax refund check had been deposited overnight. While I advocate that people not use the federal government as a savings account and to adjust withholding to get more money in each paycheck. This year due to some changes we got a sizeable refund. My husband and I had already discussed what to do with that money. We were going to put a large part on our credit cards to escape from finance charges that are higher than our investments are making and to pay down debt in general. We had also discussed putting more into our “life happens” savings account since we had been drawing from it recently. However, since we had that discussion, several things have happened that are causing us to revisit that plan. It started this morning, as I left for work in a good mood because of the deposit. I discovered that my automatic garage door was not closing, and the interior lights were wildly flashing. Great, I thought and began subtracting the estimated repair costs from our refund. Our lawn mower really needs to have the blades sharpened. Our grass looked like a toddler had cut it with scissors the last time it was mowed. We are still mowing it with a push mower even though we have a sizeable lot that requires a riding mower. So do we do the repair/maintenance or buy the new (and wildly more expensive) lawn tractor? We are anticipating higher than usual upcoming medical expenses due to a back injury that is aggravated by several activities including the hours it takes to mow the lawn with a push mower. Therefore, now we are left with revisiting the question of what to do with our windfall. Here is how our discussion will go.
1. We will each make a list of what we personally and as a family feel we need and want to spend this money on.
a. We will also prioritize the list.
2. Next, we will combine lists looking for common items and priorities.
a. Remember that priorities generally come from personal values. Whether an item is a need or a want can also affect its priority ranking.
3. We will look as where these items fall in relation to our family values
4. We will look at how much of our “windfall” money each item will take and:
5. Look at how much of our monthly spending items will require.
a. Some items are partially budgeted for- some medical, some maintenance items, etc.
6. Finally—what is the opportunity cost of these items-if we say yes to this item, what will we have to say no to and for how long?
This sounds like a long and laborious process. What I discovered is we make this kind of decision in the grocery aisle without the formality of the conversation we are having tonight. For example, in the meat aisle, the steaks looked good and certainly, a steak dinner at home is much more cost effective than going out. However, if I bought the steaks- how many nights of meatless dinners would that require? If we buy chips and dip, how much fruit would we have to give up? If we buy organic foods or gourmet foods, where does the extra money come from to pay the higher than average food bill?
We rarely give this kind of thought to extra money, birthday and Christmas gifts, refunds, overtime, etc. Mostly because it feels like extra or found money and found money does not count. Found money counts. Cash given as gifts is intended for the recipient to buy exactly what they want rather than guessing at a suitable present. We need to remember that helping ourselves become financially stable, ready for retirement, or having a good life happens fund, is still a gift to ourselves and our families. Reducing stress, including financial stress is one of the best gifts we can do for our families and ourselves. It pays off several times over in reduced health costs, (less stress, fewer health issues caused by stress) and less income spent on interest we pay to financial institutions for loan and credit card debt to cover emergency events. I am not advocating you should never spend extra money on yourself or your families.
What I am saying is that we should use the same intentionality on what to do with found money as we do deciding where we are going out to eat, kind of cell phone to have, or what centerpieces we want to have on the table at our weddings. Spending intentionally works with everyday spending as well. Whether you have a coffee shop, work vending machine or download music habit, think about what else you could be doing with that money. While a dollar or two or four each time may not seem like a lot of money, adding it up over the course of a week, month or year may show you larger numbers that might be better used elsewhere.
By the way-we decided to split the money between the lawn tractor (we value both health and a good-looking lawn) and debt payments. It is already paying off- I have started mowing the lawn for my husband giving his back a chance to rest.