All Of It

Are you human? Good, I was hoping so. This post is for all the humans out there. We humans have a knack for playing little tricks on ourselves to get what we want. In today's piece, I'm going to discuss "extra." Specifically, extra income. We're not good at managing extra income. Tax refunds, bonuses, extra paychecks, commissions, gifts, etc. We love treating these irregular cash inflows as extra, and by extra, I mean we don't have to be responsible with it.

You know what happens to extra, right? Of course you do! For most of us humans, we waste it. I use the term waste not as a reference for spending on wants, but rather as an indictment of our lack of intentionality.

I'll use the example of a typical family. They know when their paychecks arrive each month. That income, whether budgeted or not, is largely allocated for life's various expenses. It's rhythmic. It's normal. But the extra? If we receive extra income, the typical outcome is to mentally and emotionally carve it out from our normal income and impulsively spend it. We forget context, goals, and priorities. Instead, we just act. It's a little Jedi mind trick we play on ourselves. We convince ourselves this income doesn't count, so we just willfully ship it wherever our emotions tell us to.

Here's the alternative. I'm a big believer that all income is created equal. Every penny that comes in, whether a normal paycheck, bonus, tax refund, or any other surprise we might receive, should be woven into the plan.

I recently met with a client who is a textbook version of what it looks like to get it right. They received an inheritance. As soon as they knew how much it would be, it went into their budget alongside their normal income. His income, her income, and inheritance. One big pot of money. It was just like every other month, except this month had a lot more in the pot.

They negotiated where this month's income would go, including the extra. A handful of categories received some extra love due to this larger income. Their decisions were proactive, measured, made in context with the larger situation, and aligned with their goals and values. Once they negotiated the plan, the next step was easy (and hard): They executed the plan. When the money arrived, they did exactly as planned. Money was physically moved into each respective destination, ensuring they honored their past selves' plans. Perfect.

It might sound like I'm splitting hairs with this one, but trust me, it makes all the difference in the world! When we allow all income to be created equal and take responsibility for it as such, we make different decisions. Better decisions. I could tell they had a ton of peace and unity with their plan. Nothing was impulsive. Every decision made sense. It moved them closer to their aspirations.

This is a model to follow. Regardless of where the income is coming from, treat the same as the rest. It can make all the difference in the world.

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