How Windfalls Can Mess Up Your Quicken 2012 Budget

Getting an unexpected windfall sounds like a wonderful thing, but it can really do a number on the budget you've developed in Quicken 2012. In a nutshell, you face two big problems with windfalls:

• You never get the entire windfall, yet spending as if you will is quite easy.

  
  



• Windfalls, by their very nature, tend to get used for big purchases (often as down payments) that ratchet up your living expenses: boats, new houses, cars, and so forth.

  
  

Your boss smiles, calls you into his office, and then gives you the good news. You’re getting a $5,000 bonus! “It’s about time,” you think. Outside, of course, you maintain your dignity. You act grateful but not gushy. Then you call your husband.

Here’s what happens next. Bob (that’s your husband’s name) gets excited, congratulates you, and tells you he’ll pick up a bottle of wine on the way home to celebrate.

On your drive home, you mull over the possibilities and conclude that you can use the $5,000 as a big down payment for that new family minivan you’ve been looking at. (With the trade-in and the $5,000, your payments will be a manageable $300 per month.)

On his way home, Bob stops to look at those golf clubs he’s been coveting, charges $800 on his credit card, and then, feeling slightly guilty, buys you the $600 set. (Pretend that you’re just starting to play golf.)

You may laugh at this scenario, but suppose that it really happened. Furthermore, pretend that you really do buy the minivan. At this point, you spent $6,400 on a van and golf clubs, and you’ve signed up for what you’re guessing will be another $300-per-month payment.

This turn of events doesn’t sound all that bad now, does it?

Here’s the problem: When you get your check, it’s not going to be $5,000. You’re probably going to pay roughly $400 in Social Security and Medicare taxes, and maybe around $1,500 in federal and state income taxes. Other money may be taken out, too, for forced savings plans — such as a 401(k) plan — or for charitable giving.

After all is said and done, you get maybe half the bonus in cash — say $2,500.

Now you see the problem. You have $2,500 in cold hard cash, but with Bob’s help, you’ve already spent $6,400 and signed up for $300-per-month minivan payments.

Regarding windfalls, heed the following advice:

• Don’t spend a windfall until you actually hold the check in your hot little hand. (You’re even better off to wait, say, six months. That way, Bob can really think about whether he needs those new golf clubs.)

  
  



• Don’t spend a windfall on something that increases your monthly living expenses without first redoing your budget.

  
  

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Source:http://www.dummies.com/how-to/content/how-windfalls-can-mess-up-your-quicken-2012-budget.html