What would you do if you suddenly won the lottery? Would you get a luxury car, travel the world or maybe invest in the best performing unit trusts or investments. Bonuses are often seen as a prize. We tend to spend our bonuses long before we get them and very often make poor decisions on what to do with the money.
Maybe it is time for you to think about these windfalls a bit differently. Receiving a bonus, or any unexpected income for that matter, allows you to take a moment to evaluate your overall finances. Are you saving enough for the future? Are your debts under control? Allocating a portion of a windfall to save or pay off debts will help maximize its effect. Self-control, reflection and planning can dramatically increase the longevity of a windfall. In the end it’s your long-term happiness that counts.
Reflection
Reflect on instances where you received a large sum of money: How did you spend it and did your choices benefit you in the long run? Think about all the effects of your past decisions and it will help you make better choices in the future. Usually all we’re left with after large purchases is buyer’s remorse. Tap into the consequences of your past financial decisions and it may help you resist any impulsive purchases.
Make a plan
Things rarely just work out and relying on fate is a poor strategic choice. Make a detailed plan on how best to spend your money before the ever-intoxicating holiday season arrives. Always consider your future well-being: Pay off debts, make new investments or make additional contributions to your existing investments. Take care of the important things and can happily spend what’s left.
Don’t totally ignore your desires. Small treats can make the bigger sacrifices a bit easy to handle. We often see saving as a sacrifice, but really it just allows us to continue spending comfortably in the future. Delayed gratification now will lead to a better lifestyle when you retire.
Avoiding the dangers of the festive season
The festive season has become all about spending. It is often difficult to control your spending habits when you’re surrounding by the buzz, the lights and the people. Retailers know this and will try and target you at every corner. Here are a few things to look out for:
- Putting baskets/trollies at the entrance
We tend to want to fill up a basket. It happens subconsciously. If you’ve come to the store of one or a few things then avoid the baskets.
- Stores are designed so that you will spend
There is a reason why all the expensive chocolates, snacks and tidbits are in the cheque out aisle. Stores are designed to make you stop and buy. The long and constant exposure to items tends to lower our self-control. By the time you reach the cheque out those treats just seem to make sense. Make a list and stick to it.
- Targeted shopping
Online shopping is convenient and often cheaper than their physical counterparts. It also affords retailers to target products specifically to you and have a greater chance of getting us to open our wallets.
Take a moment
Theory often doesn’t hold up in practice. It will take some discipline and thought. What happens when that new item you desire overrides any logical plan you formulated? Well, all you need to do is pause. Break the stimulus/response mentality. Take some time and step away. It will help set you on the right path to wealth creation and financial security.
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.
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