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Top Strategies for Avoiding Overspending When You Get an Extra Windfall

October 18, 2022

By Jessica Lanning, JD CFP®

It’s always a great feeling when you get a little bit of extra money, whether it’s through a bonus at work or a raise, a gift or an inheritance, the sale of an asset. This is often an opportunity to buy something or spend money on something you’ve wanted for a long time.

However, it’s important to make sure that you don’t overspend when this happens. You don’t want to quickly blow through your hard-earned cash and find yourself right back where you started. In this blog post, we will discuss some top strategies for avoiding overspending when you come into extra money.


The Money Landed — Now What?

When extra money lands in your lap that you did or did not expect, it’s highly tempting to spend it on something you’ve been coveting or craving for a long time. This is your moment to pause and reprioritize.


Consider where the money came from. Is this an inheritance? An unexpected gift? A hard-won bonus? Take some time to pause and connect with where it came from and what it means to you.


Special note about inheritances or life insurance payouts: I often encourage money recipients to do nothing with large sums of money for a year or more, particularly if it has a strong emotional component to it like an inheritance or hard-earned income. Money decisions are almost always made better when done in low-emotional environments. Most of the time, you’re better off pausing before you spend a windfall.


Reconsider your priorities. Maybe you need to pay down debt. Maybe the roof needs repair. There may be things in your life that need more attention right now that you hadn’t considered even a month ago.

People often think “When I get that money, I’m going to <fill in the blank>.”  Maybe it’s to pay down debt or buy a new car.  This is the time to think, “What is the highest and best use of this money for my financial well-being?”

Paying off debt might make sense. Saving more money might make more sense.  This is the time to run your numbers.  Paying off low-interest rate debt, while it might feel great, is most often a bad financial decision.


Watch your thinking. The word “deserve” is a hot button. Yes, of course, you deserve all sorts of things. But “deserve” is different than “want” is different from “need.” If you are prioritizing that fun new red sports car over getting the roof repaired, your estimation of your deservedness needs some rechecking.

Now, those of you struggling with what a need is versus a want versus what you deserve:  That’s another ball of wax.  For now, suffice it to say that if you are living in deprivation because you feel undeserving in some way, that’s where you need to place your attention and probably get some help sorting that out so you can live a fuller life.  Notice that I used the word deprivation.  Truly frugal people don’t feel deprived.  Don’t collapse the two.


Attention new high-income earners! My professional folks — think doctors, lawyers, etc. — are the worst about this. They’ve been in deprivation mode for so long, making so little money, and are so tired of ramen, rice and beans, that they lose it when they get that first job and start spending away.

That said, there are things they likely need: An upgraded wardrobe perhaps, more convenient living conditions to suit long work hours, and more space if they are also starting their families. Where I see this go most wrong is when they spend just about every dime because they “deserve” it or “have arrived” or “need to look like a professional.”


Don’t misunderstand. I’m not advocating to be unreasonably frugal or deprive yourself. Doing those things often have a negative equal and opposite reaction that does not serve you. Just make good, conscious decisions.


Check your values. Along these lines, it’s important to check your values. Is that fancy car in alignment with your values? How about that $1000 suit? Who do you want to be and how do you want to show up? Start here, buy accordingly.


Revisit your spending plan. The word “budget” has all sorts of negative connotations for folks, so spending plan works better. Every dollar of your income should be assigned a task, whether that’s to buy groceries or entertainment or go toward savings.


Ideally, save more. In a perfect world, when you make more money, you want to save more money. Keep your lifestyle the same for the most part. Maybe you take a nicer vacation or upgrade to first-class airline tickets once a year. But ideally, you should save more money. Early and often, slow and steady always wins the savings race.


How To Make These Decisions

There’s a time component and an item component.


Time. Again, taking long pauses before making a purchase is prudent. The money will land in your account, and you will likely want to immediately go buy the thing. Ask yourself:

If I wait five hours to make this decision will it matter?

If I wait five days to make this purchase will it matter?

If I wait five months?

Five years?

The longer you can wait the better. Then, make the decision and execute.


Allocating the money. Spend some time getting clear about how you want to allocate this money. How much to savings and how much to spending? Would a different allocation feel better? Ask yourself:

How will I feel five hours from now if I make this allocation/buy this thing?

How will I feel in five days?

In five months?

Five years?

Human beings are strongly biased toward instant gratification. That’s not a bad thing. We just need to check our motivations and our feelings so that they’re not running the show.

At the end of the day, this is your life and your money. No one should care what you do with it but you. Make good, conscious decisions so that even if you don’t like the outcome in five years, you can say you made the right decision at the time, particularly with new windfalls.

If you need help sorting out what to spend and what to save, please reach out.


Lanning Financial Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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