The Rules of Spending Unexpected Money
The Rules of Spending Unexpected Money? What does that even mean? Hold tight and I’ll tell you.
So deep down we all know what we will/should be paying with our regular money (and if you don’t know then you need to read a few of my popular money-smart blog posts).
So our regular income is all accounted for and if you’re really great at it then it should all be accounted for to the penny.
Remember this blog post is not about your regular income or expenses, you’ve already got that covered.
This is about your unexpected money and The rules of spending unexpected money.
What’s unexpected money?
Well for me it means any additional money that I would not usually regular receive. This can be anything like a lottery win, gift, bonus, return on an investment, tax rebate, compensation, gesture of goodwill, overpayment etc.
Why have rules of unexpected money?
Ha, I’ll tell you why.
The thing about unexpected money is it is not expected.
Not expected, not planned and we all know what happens when we don’t have a plan.
How does rules of unexpected money work?
It’s easy (don’t you hate it when people say that?).
The objective of the rules is to allocate each category (subcategory) with a set percentage of the sum received.
What are these categories?
There are 7 categories used with these rules, however, you decide on the relevant subcategories to fit your needs.
Here’s a diagram of the Categories and examples of subcategories:
Savings Long Term – Savings for future (5 years plus) purposes. Large purchases and projects ie. Mortgage deposit, Business Start Up, Children’s University, Home Improvements etc.
Savings Short Term – Savings for near future purposes. Emergency Fund, Holidays, etc.
Household Purchases – Furniture, Home Appliances, Home Accessories, Repairs, Maintenance, Household Products & Long Shelf Life Foods etc.
Gifts and Treats – Birthday and Christmas Gifts, Treat for yourself (clothing etc.)
Debts – Credit Cards, Borrowed Money, Hire Purchases, Leases, Overdraft, Loans, CCJs etc
Investments – Crypto Currency, ISAs, Bonds, Shares etc.
Car/Maintenance/Repairs – Taxes, Insurance, MOT, etc.
How do you decide how much each category gets?
Although everyone is different, I think it’s fair to say that the debts are a high priority to all closely followed by savings both long and short. However for some it may be different for example a homeowner may decide that Household >> Furniture would be their highest or at least second priority.
You will be able to see my priorities in my breakdown later in this blog post.
How I use Rules of Spending Unexpected Money.
As you can see I use three breakdown variable components for my Rules of Spending Unexpected Money .
Which breakdown are used is determined by the amount of money I unexpectedly received.
Well consider this, if I received £100 and distributed this sum using my 3rd breakdown structure the amount that was transferred towards my debt wouldn’t have much of an impact.
At the same time the contribution received to the gifts and treats category which is a low priority to me would’ve been too much and better off allocated towards reducing debts.
How I Spent my Christmas Gift Money.
Here is an example of what I did with the £150 that I received as Xmas gifts.