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?