Raise your hand if you’ve ever been in this situation…
You somehow get some extra money, maybe from a tax refund or a bonus and as soon as the money hits your account you suddenly get an unexpected bill to pay that’s around the same amount. Maybe you just got your annual bonus of $500. The day it hits your account your car breaks down and the repairs cost $450. Sound familiar?
You’re not alone. This happens all the time, to a lot of people and no, it’s not a coincidence. There’s a simple concept to learn from this:
If you don’t assign every dollar you earn, your money will attract liabilities.
In simple terms, if you don’t have a specific plan for every dollar that comes in your possession, you’ll find that the money will find a way to go to something, and that something is probably not what you want it to be.
So, what does all of this have to do with your last debt payment?
Let’s say you’re getting close to paying off your car loan. It’s $300 a month. That means, once it’s paid off, you have an extra $300 of income per month… and it’s absolutely essential that you have a plan for it.
The first thing you need to do is make sure all automatic payments have been discontinued. Once the loan is paid off, the bank will not automatically stop payments to the loan. Sneaky, I know. If you forget this step, you can call the bank and they’ll sort it our for you but it’s a lot of unnecessary extra effort. Set an alert on your calendar to discontinue your auto payments the day after your last payment.
Once you have the admin work out of the way, it’s time for the fun part. What are you going to do with that extra $300 a month?
Here are a few ideas to get your creative juices flowing:
If you don’t have 3-6 months of living expenses set aside, set up an automatic transfer of your $300 to your savings account each month
Invest in yourself! Is there a skill you want to learn? Put that $300 towards your education, such as books, online courses, seminars, or a coaching session
#TreatYourself! It’s a big accomplishment to pay off a debt and if you want to celebrate, do it! Just make sure you’re not spending more than the amount of your new income and make sure to have a plan for the money in upcoming months.
Make your money work for you. Put the extra income in investments and let it grow.
This concept can apply to any kind of new income you’re getting. It’s tax season and if you’re getting a refund, it’s the perfect time to put this into practice!
Comment below with how you plan on using your new income!