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The Best Way to Handle a Windfall or Monetary Gift

At a wedding earlier this month, my grandmother slipped me some folded paper and told me to put it in my wallet. After I’d left, I discovered it was two checks, one for me and one for Micah. Since his birthday was just last week and mine is in September, I figured they must be birthday gifts.

Now that my birthday is approaching, I’ve started to think of all the things I’d like to do with my money: “I’d like to replace our food processor,” “I’d like Hairspray and Enchanted,” “I’d like a book on CSS hacks,” “I’d like to buy fabric,” “I’d like to go on a date,” “I’d like to put some in Kiva.”

Lots of fun possibilities here, but I have to reign myself in. One minor advantage of gift cards is that you have a strong reminder when you’re going over what you were given. With cash, on the other hand, you can spend it anywhere and you can easily find yourself spending twice as much as you received.

So instead of falling into the mindset “I got $X for my birthday,” I need to cultivate the mindset, “I have $X to spend on a birthday present from Grandmommy.”

Writing Down What You Spend

One of the best ways to cultivate that mindset is by keeping a tally of how much you’ve spent and how much you have left. That way, when you’ve spent it all you can switch your thinking to “Wow, I really enjoy the things I bought with my birthday money…which is now spent.” And if you’re in the store and something catches your eye, you don’t think “I have $50 to spend,” you think “I have $27.50 left to spend.”

Keeping the tally in your head is risky. It’s more prone to emotional reasoning than a tally on cold, hard paper or in a file. You may discount a certain purchase as not really part of the tally in order to spend more on a new, appealing purchase. But the truth is that you wouldn’t have bought the first thing without the gift/windfall. Writing it down makes it more real.

Tallying doesn’t have to be complicated. You can use a simple sheet of paper (which I’d tape or tack somewhere so you don’t lose it), or a notepad file with an icon on your desktop, or a spreadsheet with an icon on your desktop (or in Google docs), or a draft in your e-mail account, or an item on your monthly budget. What matters is that it be easily accessible so you actually add things to it.

Edit: I forgot to add that keeping the money as cash in an envelope is another good way to make sure you spend only what you got. I used to do this as a kid, but now it works less well since I buy online so often.

Larger Windfalls: Writing a Plan

With an average birthday gift of $10-$100, you probably don’t need to do much advance planning on how you spend it. If it’s a smaller amount, you can pick the item that you like most (and is within the gift price). If it’s on the larger end, you might be able to pick several. Simple.

But when it comes to larger windfalls, it’s best to plan them out ahead of time, as well as keeping track of how you spend them when the times comes.

For example, this couple received a $10,000 windfall. However they choose to spend it, the first thing they should do is spend time planning. Ideally, it could sit somewhere like ING Direct and earn some interest while they’re planning.

In this case, a spreadsheet spending plan might work nicely, but even a piece of scratch paper (kept in a safe and accessible place) will do. Experience budgeting other money translates nicely here.

The Power of Writing it Down

When handling money of any kind, whether in our monthly budgets or something special, writing it down gives us power. Our brains may be good at coming up with plans, but there’s no real way to set things concretely in there.

Writing down our plans says “Yes, this is how I will spend it.” It says “This is how much money I can spend and this is how much I have already spent.” It frees us (somewhat) from emotional reasoning about whether or not what we’ve spent “counts.” It says “Well, you did spend this much, now figure out where you want it to ‘count.'”

It helps us avoid overspending and spend on what we really want instead of what just catches our eye.

As a plus, it also gives you an automatic list of what you’ve spent gift money on so that you can write a better thank-you note at the end.

How do you handle monetary gifts or windfalls?

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August 31, 2008 at 11:57 pm


Vered August 26, 2008 at 1:08 pm

If it’s a small amount, I just spend it. If it’s a larger amount – and for each person the definition of “larger” would be different of course – I absolutely agree that it’s essential to plan, in writing, what would go into savings or investing, what would be donated and what would be spent.

Laura August 26, 2008 at 3:01 pm

Writing down your goals is a powerful motivator. It stops you from just spending it away.

deepali August 26, 2008 at 4:45 pm

Everything just goes into savings. 🙂

And on a random note – why is everything italicized?

mrsmicah August 26, 2008 at 4:48 pm

Forgot to close an “em” tag. Fixed. 😛

My Daily Dollars August 26, 2008 at 6:27 pm

I know the feeling! It’s so easy to overspend gifts. I try to write it down as well. For larger windfalls, I’m trying to not think about spending them until I actually get them! All the planning leads me to overspending.

Cath Lawson August 26, 2008 at 7:01 pm

Hi Mrs M – Happy Birthday for last week. Did you plan what you’re going to spend your birthday money on yet?

I completely agree, with a larger amount folk should definitely write it down. I think the temptation for many people would be to go mad and wind up blowing it on stuff they didn’t need.

Alisa August 27, 2008 at 10:01 am

The most recent money gift I received was used to pay a very important expense. I don’t receive a whole lot of monetary gifts but when I do, they etiher go towards an expense, something special for my mom, and occasionally; I’ll treat myself to something.

Be well.

Laura In Atlanta August 27, 2008 at 2:10 pm

Happy early birthday!

I once got a $10,000 gift from the estate of my grandparents after they both died. And I immediately put it in a CD! I was afraid that if I put it into my checking or savings account, that it would be too tempting! So, put it in a CD (and unfortunately, I didnt really shop around that hard for a good rate, I just went with what was currently being offered by my bank) and it was held up safe and sound for a whole year. And Im so glad I did! Its been 3 years now and every time i need to renew, I do it before I am tempted to spend it! (I also have since laddered it into 6, 9 and 12 month CDs, and I sort of look at it as an Emergency Fund.)

Always enjoy your posts, keep up the great work!


Faye August 28, 2008 at 8:06 am

I’ve never had a problem overspending money. My family says I think too much on how I’m going to spend my money that I lost every last bit of fun of spending.

Planning is essential. When I receive money as a windfall or a gift, I always write out what I plan to do with it, making sure that I take away the necessary savings, tithes, and payments. After that, I think about what I can afford to spend and if it’s worth it.

I had $70 to spend for my birthday last July. I only spent $30. I placed the other $40 in my checking account, just waiting to be spent. I’m still not sure what to buy so I’ll just let it sit there.

Dana August 30, 2008 at 12:09 am

We try to put half in savings and spend the other half on things we have been wanting (such as a new DVD player, books, etc). We keep a book wishlist. When we use to get contract checks for extra work my husband did, we put 50% towards debt, 25% savings and 25% on our wishlist.

thinkingthing September 1, 2008 at 7:11 pm

Oh man, save the money on the CSS hacks and just get the info online. Pretty much all these books contain information that is easily found online. Here is a good site:

I make sure my high interest savings account ACHs up my windfalls before I get my grubby little fingers on it. Sometimes I leave a little behind… I bought a crock-pot with a small portion of my economic stimulus check and have saved a lot of money by cooking food six quarts at a time.

SavingDiva September 7, 2008 at 9:04 pm

I just received a windfall ($1250) recently. I set money aside for a flight to visit my boyfriend over Thanksgiving, buy the bridesmaids dress for my sister’s wedding, and I put the rest into my emergency fund.

If my budget was so strict, I would have liked to use about 10% to treat myself…a spa trip or something…but no such luck!

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