At any given time, we may find ourselves blessed by an unexpected large amount of money, whether it’s a tax refund or a nice bonus check from a job well done at work or an unexpected gift. The amount need not qualify as a “windfall,” but typically any extra money that comes to us unexpectedly can result in temporary amnesia when it comes to our bigger financial picture.
Should we “splurge” on something fun like dinner at a nice restaurant or a mini vacation? Maybe the practical side of us wants to replace an old worn out piece of furniture or an on-its-last-legs appliance.
Well, before getting too carried away spending the bonus money, let’s revisit our friend the Money Map. Look at Destination One and ask yourself, “Is it complete?” Assuming you’ve been following a working spending plan and are committed to tithing, so if your Emergency Fund is at $1,000, you can move on to Destination Two.
At Destination Two, it’s time to look at any credit card debt that you have been working to eliminate. If there is still a balance on your credit cards, the bonus money should be applied to them in order to accelerate your debt snowball. I know, it’s not the most fun thing you could do with this “found money,” but technically speaking, you already had the fun when you pulled out the credit card in the first place.
If the credit cards are paid off, congratulations! But we’re not going to celebrate with the bonus money just yet. We still have a few boxes to look at on the Money Map before we can do that. Along with paying off credit cards, at Destination Two we are working toward bringing the Emergency Fund up to one month’s income. If you have already scratched this one off, move on to Destination Three.
This is where you might be most likely to use the unexpected bonus because Destination Three has some rather large financial goals attached to it. At this point, make sure all consumer debt has been paid off. This includes remaining balances on auto loans, student loans, medical bills, braces, money borrowed from Uncle Fred, and so forth. If you’re free and clear with those debts, make sure your Emergency Fund is at three month’s worth of income.
Once you have completed Destination Three, Destination Four tells us that if there is money left over, it might be time to go ahead and take a look at replacing worn out appliances or furniture. The bonus money can also be applied to college and retirement savings.
And, if you’re frugal about those purchases, you can probably have that nice dinner out as a treat for being so dedicated to the Compass Money Map. Now that’s a nice bonus!
“Precious treasure remains in the house of the wise, but the fool consumes it.” -Proverbs 21:20