Have you ever received a large sum of cash and just stuck it in your checking account with no spending or saving plan? You'll probably find that the extra money just kind of disappears out of your account during the course of your normal spending over time.
That's why it's so important to have a spending (or savings) plan for handling any large sums of money that you expect to receive (like a tax refund, bonus, etc.) before you actually receive it.
Communicate
Before my husband and I ever receive any sum of money, we sit down and have a chat about how each of us is thinking about using the money. Usually we're on the same page, but other times we need to negotiate how it's going to get used.
Determine Your Plan
Usually we'll designate a portion of the money for a specific project/item (like the shed we bought for our back yard last year or the family room furniture we plan to buy this year) and then add the rest of the money to our savings account either towards our emergency fund or an additional savings project.
Keep Good Records
As soon as the large sum hits the checking account, I immediately designate it according to the plan. For example, a percentage will be added to our tithe, the amount that we plan to save will be sent to our savings or money market account, and then there will likely be a portion left in our checking account to be used for a purchase.
To keep any money left in our checking account separate, I usually add a deduction for the amount we plan to spend in Quicken just so I know that money is designated and not available for "normal" spending. I also keep a spreadsheet of the money in our savings and money market account with a line item for everything that I'm saving towards, like the emergency fund, auto insurance, vacation, gifts, etc, and I add the savings money to the spreadsheet.
How do you handle large sums of money like a tax return or bonus? Do you make a plan for it?
Stacey @ creatingmyhappiness.com
Great tips! We used to take our refund and just let it sit there until we had chipped away at it so much the amount left didn't really have an impact. Now we sit down and plan where every dollar is going and we definitely get more bang for our buck!