Getting Smart About "Found Money"

Sometimes extra money, for which we have no plan, finds its way into our pocket. I call this unexpected money "found money" because it appears out of nowhere. To qualify as found money, the cash can not be something that we can predict ahead of time or can not be counted on to pay bills. The money might be an inheritance, a gift, or unexpected bonus. Found money can also be created by holding a garage sale, taking on extra hours, or starting a new revenue stream.

One of my goals for 2008 is to create an average of $333 of found money per month. I got the process started today by posting my old inventory from my failed MLM business on eBay. I put up the first 10 auctions that I expect to bring in a couple hundred dollars. I have also earmarked some old computer equipment and used books for sale over the next few weeks too. Nearly everyone has stuff taking up room in closets and attics that they never use. Turn it into found money and remove clutter from you life at the same time.

Once you have created the new cash it is time to put it to use. There is always the temptation to use unexpected windfalls to splurge or reward yourself with luxuries. I know that I am often guilty of this myself. Each year at Christmas my wife and I receive a rather substantial amount of cash gifts (from $500-1000), and we tend to use it to buy toys, gadgets, or indulgences. How do you spend money in these situations?

I found this great post from Advanced Personal Finance that deals with how people spend their found money. For me, I would tend to blow money that was a gift and invest money gained from cashed-in stock options. I am not certain why it seems natural for me to spend the money differently, but I am no psychologist. I plan to keep this in mind with future windfalls and strive to spend ALL of the money more responsibly. My plan is to reward myself with about 10% of the windfall by spending it on something fun I wouldn't otherwise buy and invest or pay off debt with the rest. I will use this particular found money from my eBay sales entirely to pay down debt.

Making $333 per month outside my normal earnings will be a big stretch for me this year, but if I succeed it will have a huge impact on my financial situation. It would be a total of $4,000 knocked off my debt in only a year for a little extra effort. Let me know how you plan to create found money this year, and where you will allocate your extra cash by leaving a comment.