Create Your Own Windfall

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By Robert Brokamp (TMF Bro)
April 16, 2002

What a joyous day it is when money you didn't expect shows up on your doorstep. Such luck comes in many forms: a rebate, a refund, a birthday check, a victorious lawsuit against an automobile manufacturer that didn't properly warn you that cars don't float, and so on.

Many a Fool makes it a rule to always invest found money. Smart move. After all, the money wasn't expected, and -- as long as you're living below your means -- you don't need it. Let's say you get a tax refund of $1,000 this year. If you add that to a Roth IRA now, and the investment you choose averages a return of 10% a year, you'll have almost $7,000 by 2022. Your retired self will thank you.

Unfortunately, windfalls are unreliable and difficult to plan for. ("If Great Uncle Thurston dies in three years, and leaves us $100,000, then we can retire.") The good news is you can create your own bonanza. No, we're not encouraging you to tinker with the brakes on your uncle's car. Try these boon-makers:

  • Any time you get a raise, stick to your current budget and invest the surplus.
  • Once a debt is paid off -- a school loan or car payment, for example -- keep writing that check, but send it to your retirement or brokerage account.
  • Search every cabinet, closet, and crawlspace for stuff you don't need. Perhaps you could sell some of your "collectibles" to Mary Anne's Cheeky Antiques down the street. And let's not forget hawking your wares on eBay or -- a great way to decrease your clutter and increase your wealth.
  • The old standby: When you get home, put all your loose change and maybe some bills in a jar. Every few months, roll the coins and make a bank deposit.
  • Forgo a regular expense -- cable TV, magazine subscriptions, that extra cell phone -- and sign up for a dividend reinvestment plan (Drip).

Building wealth through windfalls is a two-fold commitment: 1) Resolve to invest all unexpected money, and 2) seek out ways to find "hidden" money. A little effort will get the windfalls blowing your way.