Occasionally, you might get a bonus from work: a commission on an unusually large sale, a performance bonus, or a simple payment error that, when corrected, gives you a nice chunk of change. That last one is generally called back pay.

Is this a position many people end up in? Maybe not, but it’s very likely that at some point in life you will get a large sum of money — “large” being relative to everyone — perhaps from an inheritance or an insurance claim. There are many reasons that these windfalls can happen.

For the spendy-pants person, this is a problem because that money is probably gone as fast as lightning. The real struggle is to divest yourself of emotion while you weigh your options.

If this isn’t pretty clear, I obviously got an unexpected bonus recently, so I think this is relevant. The first step is to take that money and move it to your High Yield Savings Account. I use Robinhood banking through Robinhood Gold for the 4.25% interest. This means that while I weigh my decisions on what to use the money for I’m making something off of it at the same time.

This is where it becomes important: What is your mental state? If you are on track with your savings goals, and you are not struggling with a debt pile, then follow the investing order, which I will remind you is:

1. $1,000 or 1 Month Emergency Fund
2. 401k or equivalent Employer Sponsored Retirement Plan contribute up to the full employer match.
3. 3 – 6 Month Emergency Fund.
4. Pay off any Debts higher than 9% interest.
5. Max your Health Savings Account (HSA), or Flexible Spending Account (FSA): If you have these options.
6. Max your traditional IRA (tIRA) or Roth IRA (Roth)
7. Max your 401k.
8. Pay off debts above 4%
9. Invest in a taxable brokerage account.

For many people, in the middle of this list – the debt pay off – will be the biggest bang for their buck. The problem is a lot of people don’t get the same joy from following the best mathematical answer.

I had a mentor many years ago who once told me that any large amount of money should always buy you something that you’ve wanted for awhile, but was just a little too expensive. Maybe a Steam Deck, or a PS5, but not “new car” expensive. The idea was that for most folks, when they clear the slate of debt with an unexpected “win”, they don’t feel like they got much out of the money. But if they splurge just a little bit on a nice thing they’ve wanted for months or years then they can mentally let the rest of the money go into whatever bucket it needs to go into to make their life better.

For me, I plan on buying a Steam Deck competitor, the Legion GO. Then, the rest will head to capping my HSA for 2026. Since that HSA wasn’t on my plan for the year, it will be an unexpected boon to my tax savings. A capped 2026 HSA will save 24.75% in taxes (can’t save on the FICA this year because it’s self funding, not payroll), which comes out to $2,165.62 on an $8,750 cap.

Remember your goals and not overly “treat yourself” if you get some unexpected money. Stick to your plan!

~~Miniwing~~
Gamer, Parent, Stoic