The only thing about life you can predict is that life is unpredictable. Keep in mind that you will encounter both windfalls and downfalls and it’s important to be prepared for both.

When you suddenly come into some money, also known as a windfall, it may be tempting to spend it all and not put it towards your savings or goals. This money may come from a relative during the holidays, or maybe an inheritance or a salary bonus. Maybe you won the lottery. Regardless, it’s important to have a plan in place on how you’ll handle these windfalls before one comes along.

Here’s one way you can manage a windfall:

Amount Received Unexpectedly
x
Percentage Towards Your Goals (as a decimal)
=
$ Amount Towards Future Goals

So now that you know about windfalls, it’s time to learn about downfalls. These are unexpected expenses or decreases in income that come suddenly and without warning. This could be a medical emergency, or a speeding ticket, or perhaps you got fired. Whatever it is, it’s always best to have an emergency fund ready to help weather the unexpected.

Financial Beginnings is a national 501(c)(3) nonprofit that empowers youth and adults to take control of their financial futures. Their educational programs incorporate all aspects of personal finance to give individuals the foundation they need to make informed financial decisions. Financial Beginnings reaches more than 200 K-12 schools and colleges and more than 100 community-based organizations annually, serving all groups with special focus on populations most in need. For more information, visit www.financialbeginnings.org.