It’s nearing the end of September, so soon I’ll be calculating what extra money I’ve found this month. These “snowflakes” come from taking surveys, staying under budget for the month, filling out rebates, and selling things. If you click on “My Debt,” you’ll see that I found between $200 and $400 each month to send off to my credit-card debt.
Last month, I paid off the last of my credit-card debt. I’m finally in the happy place where I don’t have to put that money toward my debt. The whole time that I was working so hard to generate extra money, I kept fantasizing about what I’d do with such money post-debt. My husband and I haven’t worked out exactly what our next financial goal will be. I can tell that not having a goal made me lose some momentum! This month, I think I’ll only have about $70 worth of “snowflakes.” Partly this is because I spent a little extra to move the blog to it’s new home. Partly it’s because I totally screwed up trying to sell a dress on eBay (basically I’m only breaking even between what it sold for and what I had to pay to get it cleaned). But, I think not having a goal in mind has made me a little less motivated. So, next month I plan to get that sorted out and get back on the bandwagon!
However, kick in the pants aside, the big question at hand is what to do with my “snowflakes.” Do I just keep sending them all to our ING account for whatever goal we do decide on? Or can I spend them on fun things? Or should I find some middle ground?
Somewhere along the way, I heard a version of the Pareto principle applied to savings. The principle says that 80% of your effects come from 20% of your causes. However, it seems to have stuck in my brain as a good way to save money. Keep 80% of a windfall in the bank and allow yourself to splurge with 20%. Now, I’m also thinking that I might alter the scale a bit. For example, I’m getting a nice extra stipend this month for my new duties at work. It covers the whole semester and should be at least $1,500 after taxes. Here’s what I’m considering:
- 90/10 for all windfalls over $500: For major amounts, I’ll send 90% to ING savings and put 10% in my “fun savings” account.
- 50/50 for all “snowflakes” and windfalls under $500: I’m thinking that doing that split will keep me a little more motivated on the snowflake side. It’s hard to get excited about making extra money to pay down our mortgage or invest, but it’s easy to get excited about a little extra money for fun. For example, I totally adore this necklace that Simple Mom is giving away. Even if I don’t win, I’d really like to get one. :)
Now, is 50/50 way too indulgent? I know that I didn’t cut myself that kind of slack while paying off debt. Should I do it now? I’m pretty sure our next financial goal will be an emergency fund. I should just keep at it. Of course, as long as I don’t go crazy and spend all my “fun” money at once, the reality is that the fun account would go to any emergency that comes up. You can see that I’m about to justify my new plan. . . I think I need some advice from sensible readers! How do you handle extra money? Spend it? Save it? Somewhere in between?
7 responses so far ↓
1 Uncommonadvice // Sep 23, 2008 at 4:54 pm
Resist temptation, and delay your gratification!
2 Paige // Sep 23, 2008 at 5:39 pm
I would think of Pareto as 80% of Savings coming from 20% of your sources. So for me, I save on the Kroger card, curbing spending and other stuff. But the major part of the spending comes in from air miles.
3 Carnivals, Festivals and Linklove — Almost Frugal // Sep 28, 2008 at 10:02 am
[...] My Daily Dollars budgets according to the 80/20 rule. [...]
4 WillowDee // Sep 28, 2008 at 7:25 pm
Congrats on paying that debt off! I hope I’m not being a downer, but I’d go closer to 75/25 on windfalls under $500. We all need a little splurge on occasion, but you can always revisit your priorities on the money you have saved, and perhaps take a bit from it for a bit of fun later. But once money is spent, it’s gone. Forever. So, take 25% for a bit of (carefully planned) splurging, and add the 75% to your savings. Especially considering the state of the economy right now, I’d rather be safe than sorry.
5 mydailydollars // Sep 28, 2008 at 9:39 pm
Nice tip WilliowDee. I’ve been rethinking my plan here. . .I may say that I have to snowflake a minimum of $100, then go 50/50 up to $500. However, I am sending all money to savings. . .it’s just “fun” savings for vacations and bigger purchases vs. “emergency.” In a real emergency, all savings will go to that!
6 Carnival of Money Stories « Funny about Money // Sep 30, 2008 at 3:58 am
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7 Mary@SimplyForties // Sep 30, 2008 at 1:27 pm
Congratulations on retiring your credit card debt! I’d stick with the 80/20 across the board. Or at the very least, 75/25. Once we start to slack off in some areas, other things tend to slide too. 20% in your fun money account ought to buy you a lot of fun! Good luck.
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