The following is a post I wrote as a staff writer at Sweating the Big Stuff last August and my current update. Yes, I received permission from SBS to republish my older works from his site. 🙂
As a zero-based budgeter, I am sometimes asked what we do with any windfalls that may pop up. A few years ago, I wouldn’t have been able to tell you, but now we have a plan.
Mr. BFS and I sometimes have a few hundred dollars at the end of the month that is just leftover – extra cash after all our savings goals and expenses are covered. Most of this extra usually comes from the sports officiating Mr. BFS does after work but now a little of it is from my blog as well. 🙂
Anyway, for almost a year we just socked the extra away into the emergency fund, but hubby once complained that his extra work didn’t seem to be bringing him any extra money (“fun” money specifically). I don’t have as many hobbies as Mr. BFS, so I had never really thought about it like that. After talking about it, we came up with a system that has worked really well for us so far.
We put 50% towards our emergency savings and/or mortgage depending on how much is in the emergency account. If we don’t have at least $10,000 in the emergency fund, we put it all towards that since $10,000 is the bare minimum for us to feel secure. If that is taken care of, we split the 50% between the emergency fund and the mortgage as we see fit. Another 25% goes to our vacation account and the last 25% is split between our two individual fun money accounts.
This has been working well, but we will now be getting four “extra” paychecks each year – we are both paid biweekly on the same day since he got his new job. We agree (in fact, hubby brought it up) that $2500 just seems like a ridiculous amount to add to fun money accounts, so we will probably be putting those four paychecks a year into a second Roth IRA.
As I was writing this up, I noticed that Daniel even has noted in that he was thinking of putting some “extra” money either in savings or towards a want, specifically an iPhone.
I also came across 4 Ways to Maximize Your Stop Loss Pay at No Debt Plan and thought Kevin had some good ideas too:
1) Put it Where Your Budget Needs It
2) Pay Down Debt
3) Save It – emergency fund or Roth IRA
4) Buy a CD and think about your options
We still split up our monthly extra:
35% – Investment Cash
25% – Emergency Fund/Savings
20% – Vacation Account
10% – Hubby’s fun money
10% – My fun money
I’m not a certified financial planner, so what do you do if you are ever lucky enough to have some extra money left at the end of the month?