By Rob Comfort
During this time of unprecedented economic uncertainty and market turmoil, there are some who find themselves in an unexpected, and sometimes puzzling, situation: They have more money left over at the end of the month than they usually have.
Whether it be because working remote has reduced commuting costs, eating at home has been less expensive than eating out, or spending time in Zoom meetings has meant less spent on new clothes, the result has been a surprise to some—extra money in the checking account. So—what to do about that?
If you find yourself in this situation, consider the “Rule of Three:” When you have an unexpected windfall, put 1/3 of the windfall towards paying down debt, 1/3 towards long-term saving and investing, and the remaining 1/3 towards something rewarding or fun. Let’s take each in turn and talk about the benefits.
The amount put towards paying off debt—even if it is just $50 or $100—can have benefits to you, especially if it can be done repeatedly. Small ‘nibbles’ on the debt mountain are always helpful. Start first with any high-interest debt like credit card debt (and quit adding to that debt if you can!) and move to the next highest interest rate such as auto loans or student debt.
Next—put money away for retirement savings or long-term goals, such a college savings. Here the value of compound interest plays a role—a small amount put away now will reap benefits in the future—say 20, 30, or 40 years from now.
Finally, take the last 1/3 and put it towards something meaningful. Sign up for that on-line yoga-class you were interested in, buy that recipe book you’ve been eyeing, or just take the kids for—socially distanced, of course—ice cream!
Of course, not everyone will be in a fortunate situation such as this, but if it happens to you, remember the “Rule of Three!”
About the author: Rob Comfort
Rob Comfort is the president of CUNA Mutual Group’s broker-dealer, CUNA Brokerage Services, Inc. (CBSI). CUNA Mutual Group is a leading insurance, financial services and technology company focused on helping people achieve financial security through all life stages.
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