Monthly Archives: March 2016

Extra Money?

by Lauren Chaplin, Master Financial Education Volunteer

We have all probably at one point in our lives have been promised something that we didn’t get or were never able to cash in on. A friend who said they would watch your children because you helped them out. Your sibling putting gas back into your car after borrowing it. What about when you think you are going to get some amount of money? How should you prepare for that?

Every year, people go through this. You think you are going to get money back on your taxes or you have been promised a raise or a bonus. Some people fall into the trap of spending this money before they have it … counting their chickens before they hatch. The old saying goes directly hand in hand with how people SHOULD think when facing these ‘promising’ situations. Nothing is guaranteed. I am currently volunteering at a tax office and I have seen it firsthand: people are shocked when they are told that they actually owe money instead of getting something back like they thought. My simple advice is: your monthly budget should NEVER include funds that are not guaranteed.

If you believe that you will receive extra income one month; I believe that you should NOT figure this amount into your monthly budget. Why? Unless that money is in your pocket, it is not your money yet. You should also NOT spend it before you have it. You should not spend it before it is deposited into your account bank account. Often people have made charges to their credit cards with the anticipation that they would get money. For some, that money never arrives and they are stuck with a balance for months to come.

So what should you do?

1. Make your budget with just your regular income.

2. Stick to your budget. Try very hard to not to get tempted to spend beyond it.

3. Make a plan if your unexpected money comes along. Money Girl (at has an article that offers a suggested PIP approach:

a. Prepare for the unexpected
b. Invest in the future
c. Pay off high-interest debt

4. Act on it when you get the money

Some people think that if the money is a small amount, then it’s not worth to have a plan for it or even split it. That is your choice. Sometimes putting it all into one category means that you can jump start or focus on the others when that first is taken care of. Having some sort of financial plan for when goals are met will help make the transition easier and keep you on track for the rest of your financial goals.