12.30.09 | Cash Windfalls and Debt
Over the holidays people often receive small cash windfalls as gifts or holiday bonuses. Extra money is always great, but it is sometimes hard to decide what to do with this money especially if you have debt to pay off. When you get extra money it is fun to go out and buy something you really want, but it is practical to put that money towards debt. So what should you really do?
I usually use the 25%-75% rule. This means using 25% of the money to buy something fun and 75% of the money toward paying off debt. By doing this you won’t feel deprived, but you won’t feel guilty either. It is best to put the 75% towards your debt with the highest interest rate. If you have credit card debt that is probably the one you will want to tackle first. You should use this rule with every cash windfall until your debt is paid off. If you do not have any debt you can use the same rule and put the money into savings or investments instead.
Here is an example: For Christmas this year I received about $500 in gifts from family members. Although I do not have any credit card debt I do have student loan debt and a car that I am paying off. Since my car loan has the highest interest rate I took $375 and put it towards paying that off. I then took the the remaining $125 and went on a little shopping spree.
Of course, if you are in serious debt and not able to make even minimum monthly payments it is wise and necessary to put the entire sum towards digging yourself out. Otherwise, have a little bit of fun, but keep your eye on the end result and think about how good it will feel when you are debt free!
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very interesting, i learned a lot
January 29th, 2010 | #
I’ll remember this. It seems very practical.
January 27th, 2010 | #
Great article. The 25%-75% rule is a great planner to follow.
January 26th, 2010 | #
Very interesting, worth applying to my debt load.
January 23rd, 2010 | #
Very interesting and good advice to apply.
January 23rd, 2010 | #
This is very useful information. Everyone should focus on paying debts first. Then you can shop and have more fun later.
January 21st, 2010 | #
I think since the money was a gift, or atleast most people dont expect it, why not use all of it to pay off debt, just for the simple reason you went that long without a shopping spree so what is it to wait an extra couple of months
January 20th, 2010 | #
It’s interesting!
January 20th, 2010 | #
Common sense to pay back debt first.
January 19th, 2010 | #
makes you think about how to spend your money.. veru interesting
January 18th, 2010 | #
goooddddddd
January 17th, 2010 | #
VERY INTRETSING FOR ME
January 17th, 2010 | #
I disagree with the 25%-75%.As the article states “By doing this you won?t feel deprived, but you won?t feel guilty either.” If I have that dept it is because I “borrowed” money that needs to be paid back. So if I ever recieve any extra money that would go stright towards the dept. The fact is I borrowed money that was not mine and now I have a dept that I am full responible for. Cleary I already spent that money which lead me into a dept and I wont feel like I deprived myself in any way but in fact i wouold feel gulity for not paying back what I so called “borrowed.”
January 17th, 2010 | #
great idea. i always want to go shopping when i have money but now i’ll think otherwise.
January 15th, 2010 | #
Good knowledge to have.
January 14th, 2010 | #
Oh boy, I have a huge problem with shopping. But I also like to be rather conservative when it comes to saving. Debt is easy to consume and I believe the 25-75% plan really does make sense. Thanks for the advice.
January 13th, 2010 | #
lovin it
January 12th, 2010 | #
will always be learning about money, this is valuable to read
January 10th, 2010 | #
It depends on how much ‘extra’ money one gets. Obviously if it is a substantial amount ($100 or more), then it would be wise to put at least SOME of the money towards bills, i.e. credit cards, gas, groceries, etc. However, I think anything less than $100 should be used for ‘fun’ stuff- eating out, going to the movies, etc. UNLESS one is behind on meeting financial obligations. It is then, that every extra dollar received should be spent only on meeting those financial obligations.
January 8th, 2010 | #
I agree that you should save some of the money and spend some on yourself. That’s why you save money in the first place you might as well enjoy some of it.
January 7th, 2010 | #
This article was very helpful
January 7th, 2010 | #
I’m a big tight wad! I go to consignment stores and buy my clothes off the $1 racks and some of them are brand new designer clothes! I go to a store called Dots where nothing is over $20 and it’s all this weeks Fashions! I shop at Aldi’s for my Groceries and save about $30-$40 a week! Then, I buy everything else needed at Walmart! I also buy a lot of things off ebay, half.com, and so forth. We save atleast 25% or more of my husbands annual income a year!
January 7th, 2010 | #
I like this article a lot.
I now have a different outlook on how I should spend my CASH!
January 7th, 2010 | #
that’s pretty cool..
January 7th, 2010 | #
Helpful
January 6th, 2010 | #
this could really help me in the future
January 6th, 2010 | #
i do think that way, but i don’t always do it. got ot get better! if it work for others I know ‘it works for me.
January 6th, 2010 | #
good article and information
January 6th, 2010 | #
Good site….
January 5th, 2010 | #
Wow……..very important information.
January 5th, 2010 | #
grreattt article!!!!
January 5th, 2010 | #
This article intrested me.
January 5th, 2010 | #
I’m very happy to say that I am not in debt whatsoever =)
January 5th, 2010 | #
good article
January 5th, 2010 | #
I needed this info 10 years ago. Better late than never. I will use 25-75%. As much as possible
January 5th, 2010 | #
I agree strongly with the 25% rule. I really should start conserving money for things I need vs. things I want.
January 5th, 2010 | #
I’ve always heard 10% for fun, 10% tithe, and 80% for debt, but I suppose this could work as well.
January 5th, 2010 | #
pay off your debt . When you get extra money , because is likeopportunity and chance have come to do it.
January 5th, 2010 | #
Great article!!!
January 5th, 2010 | #
I didn’t knew any of this. Thanks for the information
January 5th, 2010 | #
I liked this article.
January 5th, 2010 | #
yea we should put ourself spend and get some me time.
January 5th, 2010 | #
I love the idea.Thnks
January 5th, 2010 | #
Good Idea!
January 5th, 2010 | #
Really?!
January 5th, 2010 | #
this seems cool
January 5th, 2010 | #
this is good info..
January 4th, 2010 | #
Made me think about …..when not to spend my money….Good One
January 4th, 2010 | #
I really like this idea of paying yourself first.
January 4th, 2010 | #
thank you for the percent spending method really helps
January 4th, 2010 | #
good idea!
January 4th, 2010 | #
Thanks for the advice, I will check into it.
January 4th, 2010 | #
interesting.
January 4th, 2010 | #
helpful.
January 4th, 2010 | #
Good advice, but I still hate spending “special” money on bills or serious items. My work check goes on those things and leaves me broke, I at least like to enjoy monetary gifts given to me by others, they expect me to spend it on something great and fun. I must oblige.
January 4th, 2010 | #
pay the debt!
January 4th, 2010 | #
this is an important question especially now a days. People have a lot of debts and don’t know how to get rid of them. There fore, I think the money that you get should go to pay your debts no matter how much. Of course you want to buy something for yourself, but relief from debts is worth it.
January 4th, 2010 | #
Ok
January 4th, 2010 | #
That is a good idea, but if I were in seriuos debt I would go with using all the money to clear up my debts.
January 4th, 2010 | #
It’s always good to learn new info
January 4th, 2010 | #
I have the same problem sometimes. I know I should pay off my debts, but I really want to purchase something I could enjoy.
January 4th, 2010 | #
I’ve never heard of that rule. Very useful information
January 4th, 2010 | #
This article is very helpfull for the ones who are in debt, it has a great balance so we as students learn how to manage the little extra money…
January 4th, 2010 | #
i would have never even look it that way… maybe i should start following this rule.
January 4th, 2010 | #
i already think of ways to save money but this still really helped!
January 4th, 2010 | #
Wow I would just like to have a family that had $500.00 to spend on me for Christmas!! LOL
January 4th, 2010 | #
thanks for the advice!
January 4th, 2010 | #
thanks for the advice
January 4th, 2010 | #
This is a great tip to to start to save, spend, and budget spending.
January 4th, 2010 | #
thats a good way to have fun but be practical as well.
January 4th, 2010 | #
Great advice
January 4th, 2010 | #
Good idea
January 4th, 2010 | #
I never thought of that
January 4th, 2010 | #
I guess I should start spending a little money on me…I can’t be a penny-pincher my WHOLE life, can I?? Then again, my siblings are hundreds-of-thousands in debt…I’m only a few thousand……so far.
January 4th, 2010 | #
interesting and i know how to spend my money better
January 4th, 2010 | #
I only got $100 for this holiday and I spent it to my son birthday.
January 4th, 2010 | #
useful for a senior
January 4th, 2010 | #
I agree; the little rule is an interesting idea
January 4th, 2010 | #
wow! i had no idea
January 4th, 2010 | #
i never knew that! thanks for the information!
January 4th, 2010 | #
Good info here
January 4th, 2010 | #
That’s a good idea.
January 3rd, 2010 | #
after reading this it makes me undrstand what to do with my money and how to handle it
January 3rd, 2010 | #
wow thanks for the advice
im going to try it out
January 3rd, 2010 | #
wow i thought i knew how to manage my money
this is great advice
January 3rd, 2010 | #
great info
January 3rd, 2010 | #
pay off your debt and save for college!!!!
January 3rd, 2010 | #
i think that is a great idea! never really thought of it like that before.
January 3rd, 2010 | #
I think that is a great idea. Never really thought of it like that before
January 3rd, 2010 | #
Sounds like a prudent plan.
January 3rd, 2010 | #
wow interesting
January 3rd, 2010 | #
That Is Super Interesting! We Learn a lot of this in economics.
January 3rd, 2010 | #
useful info.
January 3rd, 2010 | #
I am an older student and in major debit. do not follow my foott steps in that regards
January 3rd, 2010 | #
Sinomething to think about.
January 3rd, 2010 | #
Interesting
January 3rd, 2010 | #
Wise idea. I need to discipline myself as well.
January 3rd, 2010 | #
I’ve always split all my money into threes: savings, spending and charity. I’ll give more to whichever jar I didn’t give the most to the last time I got a paycheck. Although, I try to neglect the spending jar more often and give a bit more to the savings.
I have to say though, your system sounds pretty good.
January 3rd, 2010 | #
My husband and I always take care of the necessities first, buy a video game for the kids and save the rest for an emergency.
January 2nd, 2010 | #
The 25%-75% rule will be really helpful in the future when dealing with extra money. :]
January 2nd, 2010 | #
I love the idea of still rewarding yourself, even if you are having financial trouble!
January 2nd, 2010 | #
A very wise decision, especially putting the money into a savings account.
January 2nd, 2010 | #
The 25%-75% is a very good habit to get into. I can remember as a working teenager, I use to put away into the bank 15% of my check so that I could teach myself how to budget my money. It is a very good thing to d and to get in the hang of. Don’t spend all your money in one place. And bad credit is not good at all, so with a few helpful tips you can keep it on the good side.
January 2nd, 2010 | #
very useful for a high school senior
January 2nd, 2010 | #
I like how this article outlines specific percentages for different expenses
January 2nd, 2010 | #
I like how this article helps outline specific percentages for each expense
January 2nd, 2010 | #
Well,to be in debt is not a crime,but we should know how to manage ourselves to keep away from it.so as i get this money,i’ll pay off my little debt and use the 73% of the money for myself.
January 2nd, 2010 | #
thats great to know i like the 25-75% idea
January 2nd, 2010 | #
i think over the holidays people are spending too much money. however they are happy with it because they spend those money to buy stuffs for their lover. therefore, even if they spend all those money, they still happy with it.
January 2nd, 2010 | #
It is probably best to not take any loans for undergrad, as most people will be taking even more loans for grad school, thus digging a deep hole for themselves. Best watch out for private loans too…
January 2nd, 2010 | #
We were watching a video on debt in Macro, and they actually recommended you pay off the smallest amount of debt first. I think it was because of the getting it out of the way, small victories first thing. It makes sense. But it might be different if you have to slowly pay the debt off *shrugs*
January 1st, 2010 | #
Thank you, good info.
January 1st, 2010 | #
Normally my first instinct would be just to pay off all debt, but I have realized that it is sometimes okay to spoil yourself responisibly. Reading this article does help limiting yourself to presents and being responsible.
January 1st, 2010 | #
I agree with some of the other comments about being taught at an early age about money manament. But this is a good rule to play by if you have never been taught much about money managment.
January 1st, 2010 | #
that 25%-75% deal is a really great idea, seeing how i enjoy spending on myself.
January 1st, 2010 | #
A lot more people should be aware of this
January 1st, 2010 | #
I NEVER KNEW THAT BEFORE VERY HELPFUL
January 1st, 2010 | #
We were kept in the dark as to the agony of having a credit card debt. It is like being given a noose to hang oneself.
January 1st, 2010 | #
The 25-75 % is a good idea. It’s good to get into the habit of organizing a way to spend money rather than recklessly spending it.
January 1st, 2010 | #
Everyone should take a little time out of there lives and educate yourself on your finacial stituation. I little time goes a long way. Good info!
January 1st, 2010 | #
that 25%-75% thing is a great idea
January 1st, 2010 | #
i am going to start this today. thanks
January 1st, 2010 | #
75/25 is great. i also like rich dad poor dad’s advice as well.
January 1st, 2010 | #
I am waiting for the FAFSA to come up online. It is good I got my pin now.
December 31st, 2009 | #
yea that’s a good thing because then you’ll pay off the debt faster
December 31st, 2009 | #
Some kids are great at saving money while others spend it before they get it. It is important for parents to teach their kids how to plan and prepare for what they spend their money on. It is important to learn to live within our means.
December 31st, 2009 | #
thanks for that tip i am always looking for good ideas like this for when im out on my own in the realy world and that is definately a good idea and i will definately implement that into my life style
December 31st, 2009 | #
Thanks for that tip i am always looking out for good things to implement when i am off in the world on my own and i will definately use this one
December 31st, 2009 | #
thanks for that tip i am always looking for ways to support myself better when i get out into the real world by myself and i am definately going to use that tip when i am on my own
December 31st, 2009 | #
I am a full time student, with a full time job and plenty of debt! that 25-75 rule is great! i will have to start tring that out!!
December 31st, 2009 | #
this is very interesting and exciting to know.
December 31st, 2009 | #
I’m an adolescent that has learned to use this 25-75% method
though my income is not much, I just usually put my whole check in my savings account and then go from there when needed. Personally I don’t think we should use credit, cause many people are irresponsible with it
December 31st, 2009 | #
This is great info. Learning to manage money is not just black and white. We all need to start paying our selves first and saving some of the pay too!
December 31st, 2009 | #
interesting info however money management should be taught at an early age to prevent most debts
December 31st, 2009 | #
If more high schools like mine had classes that teaches students all about the financial world and how to be prepared for it, there would be better money among teens, and later adults.
December 31st, 2009 | #
yes it is true, some adolescents that dont know how manage the money they spend almost all the money to go out, buy some that they think is necessary so is important know how we can manage our money, and think more in our credit
December 31st, 2009 | #
I guess that is fair and resonable. It’s a good idea to give 25% to yourself so you don’t feel like your depriving yourself. I think it’s a pretty good balance.
December 31st, 2009 | #
lovin it
December 31st, 2009 | #
thats great to know i never know that bebore
December 31st, 2009 | #
very helpful..
December 30th, 2009 | #
interesting…makes me think about how I should spend my money
December 30th, 2009 | #