I have nothing."
I heard this from a client who had gotten fed-up with living from paycheck to paycheck, and was ready to make some changes.
Because she'd never paid much attention to money — she hadn’t been able to keep any of it. And with her 40th birthday approaching, she was worried she might be aging out of a lucrative, but physically demanding job, and it was high time to start saving.
So, we rolled up our sleeves, listed her goals, and crafted a plan to pay off some nagging debts and back taxes, allowing her to focus on a new career, and one day owning her own home.
And after carefully structuring a spending and savings plan, the unthinkable happened—she received a huge bonus.
When a windfall comes your way, what are you going do with it?
I've heard versions of this story many times:
“When I received a $40,000 inheritance from my grandmother, I didn’t know what to do with it—so I left it in my checking account, and now it’s gone…”
Maybe instead of an inheritance, it was a sold-out art show or the vesting of stock options. But regardless of the source, it's hard not to go out to dinner a few more times a month, or to take that weeklong trip to Disneyland when a chunk of money is staring you in the face every time you go to the ATM.
Is there a better use for unexpected funds than temporary luxury, mildly beneficial conveniences, or newly ingrained bad habits? I believe there is — but it's hard to know what to prioritize without a plan.
I don't have a plan, because I don't have anything to plan with
This is why we're not ready when the money we’re dreaming of finally arrives. We think we'll never have it, so it's not worth learning about it. Then when it appears, we blow it.
But think about it — does getting that first good paycheck, selling the big painting, or having your business finally gain traction magically transform you into someone who intuitively always makes the right financial moves? Not likely.
And after working with enough clients, I've now have seen countless cases when a financial opportunity is ignored because it feels too overwhelming — and those unexpected resources quickly drip out of accounts, and out of our lives.
Timing is everything
For my client with the shiny new bonus, the timing couldn't have been more perfect. We had just put the finishing touches on a system to clear a path towards saving for her leap into a new career. So after pinching herself a few times, she started at the top of her list and used her precious cash infusion to cross off each line item one by one — credit cards, taxes, cash reserve and so on — in order to set herself up to start over with her career while still moving towards that house she was dreaming of.
It might not have been considered “fun” spending—but it was better than fun. Because, instead of unconsciously shredding that opportunity, she removed the huge weight that had been riding on her shoulders for years by finally getting ahead of the spending.
For many of us with a fluctuating income, money comes around sporadically—and unless we've got a plan, it could be gone without realizing it.
So what's your plan?
It doesn't need to be complicated, but it does need to be directly connected to your goals. Start with this question:
What are you trying to do, and what's all this work for?
Is it stability?
Freedom?
Time in the studio?
A loan-free education for your kids?
Write these things down, and then write down the next step to get there. Debts and obligations don't necessarily inspire joy when we think about paying them — but it's what's on the other side that we need to keep in mind.
File your insights in a safe place so when the money does come, you'll know exactly what to do with it without being distracted by the “financial noise” we're constantly surrounded with (I’m talking to you Amazon Prime Day).
Want some help?
For years I've had my nose to the grindstone working with clients every day to determine the most efficient way to use what they have to get to where they want to go. Boil that down, and I've learned a ton of creative strategies to getting s**t done financially.
If you're looking for help to come up with your plan, shoot me an email at christina@insightpersonalfinance.com and we can talk about ways we can work together.