Making The Most Of Windfall Money

I know that with everything we're currently in the world about recession, economic downturn, and unemployment skyrocketing — it's hard to imagine extra money, but it is possible!

Tax refunds, stimulus checks, bonuses, etc. can all happen, even if things seem so uncertain.

I've had clients intend to receive more windfall, and next thing you know — they were paying off debts with it, because they began to receive so much of it!

Financial Coach

I teach my clients a powerful principle called The Rule of 3's.

This is the supercharged way to pay off debt, accumulate savings, and take care of your needs and desires outside your monthly budget.

This simple principle creates amazing results in the long-run. and today, I want to share it with you.

The Rule of 3’s

The Rule of 3’s uses windfall money (inflow of $ that's unexpected, or in addition to your forecasted income).

Here's what to do: divide the total amount of money available by 3 (after considering taxes).

1. 1/3 goes towards paying down DEBT.

  • Pay down the highest priority debt first, until fully paid off, then move to next debt.

2. 1/3 goes towards SAVINGS.

  • Pay towards savings that really need funding the most.

  • Prioritize your savings according to the Savings Growth Pyramid:

    • Savings for periodics

    • Savings for cushion & reserve

    • Savings for needs & desires

    • Savings for Golden Goose


3. 1/3 goes towards NEEDS & DESIRES outside your monthly budget.

  • Track your needs and desires in a spreadsheet to establish your priorities, amounts, and goal dates.


Here are some helpful hints:

  • You can alter the structure to meet your needs.

  • If you don’t have any debt, you can fund 2 savings accounts or put 2/3 towards needs & desires.

  • Use the practice consistently for each occurrence of windfall.


Here is a fun infographic to keep in your office or on your fridge to help you stay on track:

 
The Rule of Threes.png
 

I hope this powerful practice serves you this tax season!


PS: Needing some extra help to restructure your finances during the changing economy?

Joetta Johnson