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Tuesday, March 28, 2017

The Unexpected Windfall

Posted by Tim Stobbs on October 1, 2007

Friday was a very good day for me. Why? I got money I wasn’t expecting from my work. I forgot we have a profit sharing plan, so it was a nice surprise when I got an email about a bonus I’m getting shortly. It’s not huge but around 1.5% of my salary for the year.

So what am I’m going to spend my windfall on?  To be honest most of the money will go to our saving account to be used during my wife’s up coming maternity leave.  We are going to spend around 15% of it on a new set of shelves for the family room.

We tend to apply an 80/20 split to our unexpected windfalls.  80% of the amount will go to accelerating our current plans whether it be saving for retirement or paying off the mortgage faster.  The remaining 20% will typically be spent on something fun.  That way I don’t feel deprived after winning something and I’m still mostly responsible with it.

So how do you handle windfalls?  Do you blow it or save it?  I would love to hear how other people handle it.

Comments

9 Responses to “The Unexpected Windfall”
  1. If it were me, i’d put it on a speculative stock. But that’ s just me. :)

  2. Canadian Money says:

    I went through a period, during the last stages of the bull market prior to 2001, when I made some easy money on penny stocks. Each time I made a $1000 or more I would buy myself a music CD. Sometimes we would go out for a nice dinner. The profits stayed in the trading account. I still have the CDs and still enjoy them today, but I lost those “easy profits” over time with an number of smaller losses.

  3. First, I will need a “windfall”
    However, I never had a windfall yet

    I will pay down the mortgage first (HELOC), and if I really feel good about it, maybe I’ll travel somewhere thinking it’s free :)

    Or buy more things, so that I can post on my photoblog (iPhone!!)

    Or like MDJ said, buy volatile stocks and hope to continue the windfall luck

  4. Xias says:

    I use a similar method for windfalls. I place the vast majority of it into savings (usually dividend paying stocks) and spend a little of it on something nice/fun (my last windfall got me a wii!)

  5. FourPillars says:

    I would argue that technically, the fact that you forgot about the money doesn’t make it a windfall. However I like the 80/20 thing.

    Mike

  6. Just curious, is your 80/20 rule pre or post taxes?

    As for me I’d do something similar. But I’ve got no fixed ratio, it depends on the circumstances.

  7. Congrats on the windfall! It depends for me; I usually put 50% towards either paying down the mortgage or investing in stock and the other 50% in something I would not otherwise buy for myself if not for the windfall- like a new back-splash for the kitchen!

  8. Canadian Dream says:

    WC,

    I do the 80/20 thing post taxes. Otherwise I could never save 80% of the bonus since my taxes eat up so much of it.

    Tim

  9. Will says:

    I get 8% from my employer as a performance award. We get the option to put it into RRSPs, thus deferring taxes. I’ve done this every year since I was hired (just over 5 years now). I don’t get the benefit of dollar-cost averaging in my RRSP portfolio, but it definitely helps with my retirement planning.

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