Imagine that you won a massive sum of money – would you spend it all? Buy a large home, that Aston Martin that you’ve always wanted, or perhaps a first-class trip around the world?
A bonus is often seen as a windfall and it’s very tempting to treat yourself to expensive luxuries, but before you know it, it’s gone.
It’s time to start thinking about windfalls differently. If you receive a bonus, or any unanticipated income, take a bit of time to evaluate how this money may impact your financial wellbeing. Ask yourself these questions:
- Are you saving enough for retirement?
- Are you living with a lot of debt?
- Are you able to finance your child’s education?
Using a portion of the money to pay off any debts and reducing the crippling effect of compound interest on your credit card, will help you immensely. It’s important that you exercise self-control; take time to reflect and put a plan in place to increase the longevity of a windfall.
- Take time to reflect
Think about any time that you received an unexpected sum of money. Did the financial choices that you made benefit you in the long term? Reflecting on the effects of the past decisions that you’ve made with any extra money, will give you better foundation to make more informed choices in the future. Remember that impulsive decisions can often lead to regret.
2. Make a plan
Life can be challenging and it’s rare that everything will work out the way you expect and simply relying on fate is a dangerous strategic decision to make.
Rather, draw up a meticulous financial plan before the holiday season hits. It’s a time of the year when emotions can take over rational thinking. Always consider your financial wellbeing: think about paying off debts, make new financial investment decisions or consider making supplementary contributions to your existing investments such as a retirement annuity instead of spending money recklessly.
Once you’ve covered all of your bases, you’ll have a much better understanding of how much you can spend.
3. Avoid the dangers of overspending:
The festive season and spending money go hand-in-hand. Music playing throughout malls and giant ‘festive savings’ signs make it difficult to control your spending habits. Here are a few ways to help you from overspending:
- Stick to your list: Baskets and trollies are at the entrance of many shops and subconsciously, you tend to fill the whole basket with items that you didn’t intend on purchasing in the first place. If you’ve come to buy certain things, stick to it.
- Don’t succumb to checkout-aisle temptation: Shops are designed to make you to stop and buy items; that’s why you’ll always find tempting snacks, chocolates and other goodies in the checkout aisle. Exercise self-control.
- Targeted shopping: This is another method that entices you to spend more money than you originally intended. Online shopping is very convenient and often you’ll find that the items are cheaper than in the physical shop. Retailers are also able to target products at you based on your browsing behaviour, further tempting you to spend extra money. Don’t buy anything unnecessary.
There’s no doubt that this is easier said than done. If you find yourself drawn towards buying new items, step back and think: is this part of my financial plan? This thought process will help break the stimulus/response mentality, putting you back on your planned path to financial wellbeing.