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The frugal windfall

What would you do with an extra $50 or $100? Here are some savvy ways to stretch 'surprise' money.

By Donna_Freedman Aug 14, 2012 12:20PM
Image: Woman counting money (© Jose Luis Pelaez, Inc/Blend Images/Getty Images)A recent post at Get Rich Slowly, "I asked for a raise and got it," concerned a reader who was offered a new job at the old pay rate. After some research, she made a counter-offer and was shocked by the result.

The article concluded with a happy dilemma: "Now I need a plan for the new $1,650 increase in monthly pay. There are worse problems to have."

Suppose you suddenly came into extra money, small or large. What would your reaction be?

I know what I'd do first.

Absolutely nothing. Rather than make a wrong move, excited over additional funds (whether one-time or as a weekly raise), I'd sit tight and consider my next move. So would Mary Ann Romans, who wrote "What to do with a windfall" for

"Put it somewhere safe while you can decide the best course of action," Romans advises. "Keep living on your present income while you make your decisions for the best use of your money."

Relatively few people will get $19k raises. You're much more likely to see a chunk of graduation cash, the profit from an item sold on eBay, $20 in a birthday card from Grandma or a hundred bucks that your parents gave you to help you furnish your first apartment.

But even a small amount can pack a punch if you use it right. Consider these possibilities.

Save it

An obvious choice is dumping the cash into your emergency fund. Don't have one yet? Even that birthday gift from Grandma would be a start. Let a $20 sub-account labeled "EF" inspire you to keep building until the $500 minimum that MSN Money columnist Liz Weston suggests as a baseline.

Hoping to buy a home someday? Windfall money can go into that fund, or, again, it could start that fund. Or how about your retirement? A $20 bill or a $50 check might not seem like much, but remember the power of compound interest. (Post continues after video.)

If you've established college savings accounts for your child, put some (or all?) of the extra cash there. That surprise $50 might pay for a nice dinner out. It could also support Junior's eventual education -- and it will keep growing until he steps onto campus a dozen years from now.

Spend it (wisely)
Stock a pantry, especially since the Midwest drought will drive up grocery prices this fall. Buy things that will save you money in the future: energy-efficient light bulbs, low-flow shower heads, a case of motor oil if you do your own changes. Buy discounted gift cards for groceries or gasoline, or movies.

Got debt? If you've got that $500 EF saved, throw some cash at your obligations. "Clearing your debts means that you can start saving. . . . Furthermore, your sense of well-being is improved as your financial-related problems are alleviated," says Emmie at the Frugal Living website.

See a doctor for a general physical; if you don't have health insurance, look for care on a sliding-scale basis (the windfall means you can pay cash). The National Association of Free & Charitable Clinics provides links to such care; the Centers for Disease Control and Prevention website can put you in touch with your state's public health resources.

Visit the dentist, since some tooth problems are invisible. (No insurance? Look for a discount dental plan.) Get your eyes examined, too.

Other ideas

A warehouse club membership might help you save money. Ask for a day pass first, though, or walk through with a friend who's already a member. You might find you can do as well with coupons. You might also realize that warehouse clubs aren't for you, since you left with a big-screen TV and a giant container of gummy bears instead of a case of toilet paper and a 20-pound sack of dry beans.

(Quick aside: An alternative to the warehouse club is the restaurant supply store. I recently bought a 5-pound bag of lentils for $2.89, which is less than half what I’d pay in a supermarket -- and with no membership fees.)

See if there's a discount for paying your car insurance for a year at a time. If you're a bus or train commuter, look into transit passes.

Not happy being limited to spending or saving? Do both, then. That’s one of Kelly Whalen's suggestions in a post at Consumerism Commentary. She recommends a 50/50 split for windfalls of more than $100, although some might want to split among saving, spending and paying off debt.

MSN Money columnist Weston also believes in spending some of a windfall: 10% of it, on something you really want. I think that's a grand idea. But I'd urge you to use the rest wisely rather than blowing it all on a shopping spree or night on the town.

After all, this is money you hadn't planned on, notes a British blogger named "Froogs" at Frugal Queen.


"You did without it the day before. You can do without it today," the writer says.

If you came into even a $100 windfall and your bills were all paid, what would you do with the money?

More on MSN Money:

Aug 14, 2012 12:40PM
Thanks for the post.  I'd agree that the first thing to do is nothing.  By sitting back and assessing your situation you can get a better grasp of what is really needed and make a much wiser decision.
Aug 14, 2012 12:50PM

Right now I am on a savings frenzy to meet a year end goal I set for myself this year.  That $$ would be headed to the savings account to put me that much closer to my magic 2012 number!


If I didn't have the current numerical goal, I would put part of it into a vacation savings fund or paydown a portion of our auto loan.

Aug 17, 2012 3:10PM

My husband and I have been lucky enough to continue to get small (5%) raises for the past few years. We follow the "pretend it's not really there" rule. We were living comfortably before those raises, so we just keep our lifestyle and expenses the same while the extra goes into savings and to pay off my school loans. In fact, I calculate the raise amount per month, and I increase our automatic savings transfer amount by that much.  We also - and I think this is an important thing a lot of people don't do - regularly survey our expenses and look for ways to cut back. Cable price increased? Switch to new provider. Car is getting old? Drop the comprehensive insurance. Not using the gym as often as you thought? It may be cheaper to pay-per-use.  Review your cell-phone plan and see if you are using everything you are paying for... Have you refinanced your mortgage lately? Rates have plummetted just in the past 6 months. We refinanced and are saving $230 a month with the new payment... Also, I spent several years working a part-time teaching position in addition to my full-time job. We didn't need the extra money to live on, but it never hurts to have extra savings, especially when you can make it doing something fun, like teaching. With that said, if we ever came to a true "windfall," like the new $320mil lottery winner, we'd definitely just put it into a low-interest zero-risk savings account and then sit on it for a while until we can make good decisions on what to do with it!!!

Aug 17, 2012 4:27PM
Anything extra I ever get goes straight into savings.
Aug 17, 2012 4:18PM

The extra would go in my emergency savings account until I have at least 6 months worth of money saved.  Next would be my next car fund, then my "fun" fund.  (I have 3 separate accounts.)   And I could ALWAYS put more into retirement or make upgrades around the house...

Aug 23, 2012 10:49AM
I got a windfall of just under $20,000....I used $8500 to pay off a 6.99% car loan and the rest is in various savings accounts.  It would take an extremely urgent reason for me to touch the rest of it!!!
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Donna Freedman's Frugal Nation blog is for readers who want to live cheaply -- whether due to necessity or a lifestyle choice. It explores living sustainably and making life more meaningful at the same time.


Donna Freedman

Donna Freedman, a writer based in Anchorage, Alaska, writes the Frugal Nation blog for MSN Money. She won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. Donna also writes about the frugal life for her own site, Surviving and Thriving.