Have you ever heard of the $100 rule? It’s basically a rule for when you get unexpected money.

Does that ever happen? Yes! Unexpected money could be a bonus, gift, tax refund, lottery money, etc. And when you do get unanticipated cash, it’s sometimes hard to figure out what to do with it. That’s where the $100 rule applies.

So, what is this rule? It says that if the money is less than $100, you should enjoy spending it without hesitation or guilt. But, if the funds are $100 or over, split it up. Spend some and allot some of it towards your financial goals. Why does this rule work? Because small sums of money hardly help your long-term finances. BUT, blowing a small sum can improve your incentive, disposition, and your perception of freedom.

When you receive larger sums, like a nice tax refund, it could affect your longer-term goals. For example, you got a $1,000 refund, you split it 50/50. You put half towards savings, investing or debt repayment. You took the other half and had fun with it. That way, you get both financial gain and a feeling of gratification without remorse. You can change the split to 60/40 or another split if you’d like. I don’t recommend 0 for financial goals and 100 for fun…LOL!

Why $100? $100 is an emotional tipping point. Anything less than $100 feels like mad money. Anything over that seems more important towards things to come. If you have a higher income, you could change the $100 to $500. If your income is lower, you could change it to $50. But the basic rule stays the same. Remember, the rule is meant to be flexible.

Moral of the story:

The $100 rule for unexpected money is something you should consider implementing. I know I tell you to save everything you can, but that’s basically for money you earn. Unexpected money is something else. Why use this rule? Because, it alleviates guilt when you spend. It helps remove indecisiveness from saving. It helps to build a well-adjusted financial mentality. You can enjoy life now while still creating long-term wealth. And, you won’t’ experience remorse when spending money that you got unexpectedly. This rule is an opportunity to enjoy your life now and still take care of yourself in the future.