This post is, of course, assuming you will get a windfall. Perhaps not a windfall in the thousands of dollars, but I do think all of us get those unexpected "good" money surprises. The American way is the consumer mentality..."Oh, yay! I have extra money! What can I go buy?" but our family is still focusing on debt-reduction (due to years of the "Oh, yay! I have extra money!" mentality that put us in an unfavorable debt-to-income ratio) Surprisingly, we have been working hard at this for over six years, and progress has been made. But, we have a long road ahead as well. We have decided to implement this strategy in 2014 and I have been very happy with the results thus far. This is my creation, as far as I know, so I get to name it!!!! I probably need a catchier name if I really want it to catch on, but in our home, we have been calling it the "thirds". Every windfall is divided into thirds. We take 1/3 and pay it as extra towards debt; 1/3 into our savings account to reduce the likelihood of needing to take on more debt in an emergency; and 1/3 we get to use for some wiggle room in our budget (AKA, spend) I am hoping to revisit this post at the end of 2014 with amazing news of just how much debt was paid off this way, and let me know if you think your family would like to try this too!
March 1st, 2015 Update: This strategy helped us pay off over $6000 in debt in 6 months from May 1st to November 1st, and save over $5000 in our savings account! We plan on picking this up again for 2015 but are in a holding pattern to pay off another debt and replenish our savings account after purchasing a car for cash in February so our teenager could have her own transportation. We also have a senior in high school graduating soon which means we may be waiting until June before we get back to a normal budget.
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