Wednesday, September 15, 2010

Extra Money- Gifts and Bonuses

My husband got a decent bonus from work this past week in the form of gift certificates. These can be redeemed at any of a number of stores, ranging from high end department stores to houseware stores to electronic stores to clothing boutiques to grocery stores. These types of gift certificates are common around here, used for bonuses at set times throughout the year. There are also a few varieties of certificates, not all of them good at the same stores.

I was talking to friends about these gift certificates, how there were some I didn't like because the only grocery stores they were eligible in were the more expensive ones. My friends didn't understand my issue, because, after all, you could go to all the best clothing shops and get outfits there even with those types of certificates.
This conversation clued me (or shall I say, reminded me) in to the vastly differing attitude people have to "extra" money they weren't expecting to get.

Unexpected Money

Birthday gifts, work bonuses, tax refunds, inheritance, and gift cards. How many times have you gotten a sudden influx of cash and debated how to use it?
Would you, like my friend, use a multi-purpose gift card on buying high end clothing? If you earned a bunch of Amazon.com gift cards from Swagbucks, would you use them to buy extras? If you got a large sum of money back from your tax refund or got a nice big cash bonus from work, what would you do with it? Would you spend it on things you don't need that you'd been eying for a while or blow it all on nonsense?

Too many people get so excited about the prospect of having extra money that all thoughts of frugality and wise spending habits go completely out the window. They'll make the most frivolous and spendthrifty purchases that they'd never do if they were using money they've worked hard for and earned.
This, my readers, is the area in which our mettle is tested, where the truly frugal people show their true colors and rise about the rest.

When someone is truly frugal, they don't look at any money as "free money". All money is created equal, no matter what the source. (Ok, barring immoral/illegal sources.) Why otherwise thrifty people forget their principles and what they hold dear when dazzled by that sudden cash is beyond me. (Ok, not completely. But 99.99%)

When you get money apart from your usual income sources, you have a few choices.
Of course you can always spend it frivolously, but as previously mentioned, that is quite an unwise decision.
Alternatively, you can use that cash to patch the holes and fill in the deficits in your budget or put that money towards fulfilling your dreams.
Why would someone choose to do the former?

People spend their "extra money" on remodeling their perfectly suitable home, in getting expensive electronic toys for themselves, for taking extravagant vacations... while they still don't have enough money to live their every day lives. And then they use credit cards and get themselves into financial trouble because they don't have enough money to cover their expenses.
Even if they do have enough money to make it through the month, very often they haven't paid off their debt, whether it be credit card, student loan, car payments, or house payments, and quite likely they haven't saved up enough money for their dreams.
If only people would realize that toys and luxuries are not the most important things in the world, that they might regret those impulsive frivolous purchases, then maybe they'd rethink spending their sudden influx of cash on nonsensical and unnecessary things.

Using Extra Money Wisely*

When my husband and I end up with money or gift cards beyond our usual income, how does that affect our spending?

This month, we've got even less money than usual. We've been blessed to receive more than a hundred dollars in the types of gift cards I mentioned before. How do I plan on using them?
I plan on keeping them in my back and doing nothing with them. For now. When our bills and rent have already been paid and it is the end of the month and our account is dipping near the zero mark... instead of allowing our account to go into overdraft (which we said we'd try our best to never ever let happen again) or fishing money from our emergency fund, we're just gonna hang on tight and spend absolutely no money until we get our next paycheck. And we'll be all set food-wise, because I have more than 100 dollars I can spend in the decently priced supermarket in the town nearby (not to mention our decently sized stockpile of food.) Anything else, really, can be pushed off buying until after my husband gets another paycheck.

Last time I got gift cards, what did I do with them?
Money wasn't as tight as it is now, so I didn't end up needing to use them on groceries. But that doesn't mean I'd spend that money on expensive clothes or decorating my home. I can get perfectly good clothes from the second hand clothing store. As for decorations and furnishings- well, dumpster diving works well enough, and anything more is just nice extras, better saved for when my kids are grown and out of the house and I've become a millionaire via my writing (which is bound to happen, of course...).
I decided, instead, to use those gift cards to advance our health, save us money, and invest in long term projects.
I used the gift cards to buy a large cast iron pot, a small black pot for solar cooking, and some black spray paint, also for my solar cooker.
How were these wise expenditures?
I tend to be on the anemic side. Iron pills, in addition to making me nauseous, are also an extra expense that I don't need. Cast iron pots imbue your food with extra iron, helping to combat anemia. Additionally, cast iron pots are much healthier for cooking than teflon, aluminum, or chipping porcelain pots, which are what most of my other pots are like. One day I'll replace all my pots, but for now, this is what I can afford. Investing in your health is a frugal thing to do.
The solar cooking pot was to replace my previous solar cooking pot that got stolen. The black spray paint was to spray the inside of my new contraption which I've built but haven't posted about as the summer is nearing its finish in the Northern Hemisphere. Should I hold on to my solar cooker plans until the spring, or should I post it now for the benefit of the Southern Hemisphere people who are starting their summer and for people, like myself, who even in the fall and wintry months have enough sunny days to make solar cooking a possibility?

As for my Swagbucks Amazon gift cards? I don't use them for nonsense either. So far, what I've bought with mine has been some Dr Woods Castille Soap- one of the most frugal and healthy types of soap, especially because it has just about a million and one uses and stretches really far. (It is basically a cheaper version of Dr Bronners. if you've heard of that.)

I also bought Borax because it is a powerful, natural cleaner, useful in making many household cleaning supplies like dish soap, stain remover, and homemade laundry detergent. It isn't sold in my country, so getting it from Amazon was the only way I could get it.

And when we just get an extra amount of cash that we can spend any which way, that goes straight into our emergency fund so that we'll never need to borrow money ever again. After that emergency fund is built up enough, any cash we'd get would go immediately towards our debt snowball. Once that is taken care of, we can start saving up for our dream of buying a house!

So, when you get a sudden lump of cash or gift cards, what do you do? How do you spend it? What do you think is the wisest decision?

*I am hesitant to write about myself as an example of wisdom, because as some readers have pointed out more than once, I am still young and have yet a great deal to learn. I do not think I am perfect and really hope that this post doesn't sound cocky and stuck up. That said, in this case, I happen to be quite proud of our commitment to being frugal and our decisions we make with our money, so I will write what we do as an example of "wisdom". I do hope that no one takes that to mean that we think we have nothing left to learn...

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