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Plan For Your Unexpected Income


Kind of a weird post title huh? Most of the time, us personal finance people are telling you to save up for those unplanned expenses, but now I’m telling you to plan for unexpected income? I sure am. Let me explain. Every year, individuals and couples around the world receive money that they never expected to have. Since they weren’t expecting it, they really had no plans of what they should do with it, which typically means that they blow it on something that’s totally irresponsible and will never see that money again.

Types of Unexpected Incomes

I bet you might think that you’ll never receive unexpected cash in your life, but it is actually pretty common. Here are a few examples of ways that you’ll see a windfall of money:

  1. Income Tax – Sure, you might be expecting some money back, but what if you think you’ll only receive a check for $500 and it turns into $2,000? Chances are that you’ll blow it all, just like you would have with the $500.
  2. Inheritance – Unexpected deaths in the family are tragic, but they often come with some extra money for you and your siblings. After the split, you might be left with $5,000, $20,000, or maybe even $100,000. No matter what the amount is, you should have a plan of what to do with the money.
  3. Bonus – With the economy bouncing back, bonuses may be in your future again. Since you most likely haven’t received a bonus these past few years, this year might produce that unexpected income.
  4. New Job Signing – New jobs are available once again and they can offer some signing bonuses as well. This might be an unexpected offer from your new job, so you want to make sure you have a plan in case it is.

How to Write Up Your Plan

Just like you have a budget for your regular income, you should have a written plan for your unexpected income as well. So how should you do this? It’s pretty simple really. If you have a significant other, sit down with them and discuss what you might like to do with your extra money should you experience a windfall. Together, you just need to come up with a list and write down the amount for each item. Here’s an example of what I might put on my list:

  1. Furniture for the porch – $400
  2. Bedroom dresser – $300
  3. Painting the house – $2,300
  4. Landscaping – $1,000
  5. New windows – $2,000
  6. Paying off the mortgage – $54,300
  7. Nicer car – $8,000
  8. Down-payment for investment property – $30,000

Ok, so that’s my list. Let’s say I receive $3,000 in tax returns (and I plan on receiving zero). The natural reaction for me would be to head out to the country club and buy a year-long membership. Whew, that would be sweet. But, that would be an emotional decision. Since I have already made my list, I can calmly consult it and find out where the “level-headed me” would put the money. With $3,000, it looks like I can buy that porch furniture that I’ve been wanting, the bedroom dresser, and I can paint the house! If I would have received $4,000, then I would have moved down the list to #4 and would also pay for some landscaping. This is a great way to make good use of the money that you never thought you would have.

I showed you my list, how about you show me yours! I’d love to see your lists in the comments below. 🙂



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. All of our unexpected income goes toward student loan debt right now. After that we will probably get some new to us furniture, bump up our emergency savings and save for some renovations.

    • Sounds like a plan. Just make sure your wife is on board and that you agree on it before you receive that unexpected check! 🙂

  2. Sorry, but my natural reaction is to shove any unexpected income into the bank and then distribute it into our current asset allocation. I wouldn’t even think twice about it.

    • Nice. Sounds like you don’t even need a list! Thanks for the comment Bryce.

  3. For me, it would be saved. Locked away, untouched, not to see the light of day for another 25 years!

    • Haha. Really? You don’t have anything that you would be itching to buy? I recently saw this happen to a friend and he blew $4,000 on a golf trip.

  4. That would not be a very posh country club for $3K, but I digress. If we got an unexpected windfall today, I’d max out my HSA and put the rest toward the mortgage.

    It was very interesting last year about this time when one of the smaller Native American tribes in our area got a huge settlement from the government and gave every tribal member just over $12K. Most of the people were from very poor backgrounds and tend to live check to check. You would have thought our town won the lottery. Every used car and ATV dealership, electronics store, and just about every place that sells anything was salivating and sadly I think 99% of the people blew their money on stuff they didn’t need. It was certainly a lesson in sociology.

    • Yikes! That is pretty sad. In their minds, they looked like the wealthy, but to you they just looked like fools. If only they knew… Thanks for the comment Kim.

    • Kim, we’re currently maxing out our HSA (family plan amount), with a generous kick-in from the company of $1,500. Whew, that’s a big help! 🙂
      Of course I skirted over about 2% of my 401K to the HSA and it is still over and above the company match after that. Our health insurance actually went down, which helped to max the HSA too.

      • I have heard of this and it makes sense because you’re avoiding paying tax on expenses that will most definitely be coming in your future. But, is there ever a number that’s too high since you can really only use this money on your medical expenses? Like, if you hit $50,000 in this account, would you stop banking the money here?

        • Well, I would have to say I’d feel more comfortable if/when it hit that level. But I don’t think I’d stop funding it. Don’t forget that it’s also tailed onto a high deductible health plan, so worse case scenario for our family would be $9,000/yr if we had a really bad year.
          That’s exactly why I wouldn’t stop funding it.

          Caveat Emptor: I have to double-check some things I heard about Obamacare that may cause these accounts to become taxable (i.e. the money that is put into them and/or money that they earn). If the amount being put into the account would become taxable, I would switch it so that more was redirected over to my 401k after adjusting the medical insurance withdrawals from my paycheck.

  5. We have several things we are currently saving long term for – like another vehicle. So whenever we receive unexpected income, we evaluate that list of current needs and allocate the money accordingly.

    • Sounds reasonable to me Brian. Best of luck to you in the future. I hope you get some unexpected money soon! 🙂

  6. My wife and I are currently putting excess income towards student loan debt and our mortgage. It’s a slow progress, but we have a plan and are moving forward. I’d love to receive a big windfall though!

    • Yeah, I agree that it is a slow process sometimes! You’ll get it done though. Good luck to you!

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