Give Every Dollar a Purpose
By Kevin Gibbons
As we enter the 14th week of dealing with the Covid-19 crisis, the U.S Government is debating a second round of stimulus checks. Assuming some level of relief is approved, what will you do with your funds?
To be clear, if you need that money to pay your bills, keep a roof over your head, buy food and other essentials, then you already know. Make sure you read our recent article about triaging your stimulus check. But if you have a little cushion, what then?
We’ve written about the 50/50 Rule regarding windfall income. That is where you put 50% of this money towards your long-term wealth building or retirement investments and you spend the other 50% on anything you want, as long as it does not create a bill.
Jeff John Roberts wrote in Fortune recently that many Americans have been saving and investing their stimulus checks. Digital finance companies Square, Robin Hood and Chime all reported increases in savings and investments in increments of $1,200 to $2,400 during the middle of April. So, a lot of Americans are saving some or all of this money.
One thing you don’t want to do is leave that money just sitting in your checking account, where it will slowly get whittled away. One of the core philosophies behind The Savvy Life is that every dollar has a purpose. Loose money has a way of vanishing into the ether. So make sure you give that money a specific goal. Whether it’s building your emergency fund, saving for home repairs, a new car, or a vacation, if you give it a purpose, it now has a destination and commitment that will keep it from being eroded on small, unimportant-to-you things.
“But, I don’t know what I want to spend it on yet! Life is too uncertain right now!” That’s fine. Put it in a savings account earmarked for future use until you figure that out. The important thing is to get it out of your daily cash fund so it doesn’t disappear.
There is also nothing at all wrong with have a “serendipity” or “spontaneity” fund in your Spending Plan. This is a bucket that holds money for those unexpected opportunities that may arise, the good deal in your inbox, the weekend getaway (when travel becomes more normalized) or the perfect used car that just showed up for sale down the street.
By giving every dollar a purpose in your Spending Plan, you will reduce the amount of money that just seems to bleed through your fingers. You will be more purposeful and intentional in your spending, making sure that what you are buying truly fits into your lifestyle and goals rather than just filling space and time.
Kevin Gibbons is a Cash Flow Planning Expert, the Vice President of The Savvy Life and co-author of the international bestseller Living The Savvy Life. For the past eight years, Kevin and Savvy Life Founder Melissa Tosetti have worked with over 625 individuals and families to create Spending Plans.
To learn about how Kevin and Melissa work with clients to create Spending Plans, visit The Savvy Life’s Home Page. If you’d like to learn about how they work with financial advisors and their clients visit: The Savvy Life Advisor’s Page.