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What to do with Found Money (update)

What do you do when you get money that you did not expect to receive? I have written a great deal about this (note bibliography), but here is a specific perspective.

Let’s assume, you do not have debts to pay off. If you do, stop here, put the money on the debt. It is as simple as that. It is not exciting, fun and can be frustrating, but paying off debt is your first job.

If you don’t have a debt-load to deal with, but you don’t know what to do with it, then what? Waiting and thinking about any problem will make for a better resolution. Decisions made rashly or quickly, rarely work out as you hoped they will.

Don’t put this money in a Savings account. It will pay a very small amount (currently about 2.5% if you find a nice bank). That interest will also be taxed.

Do you have room in your Tax Free Savings Account? You find that out by going on-line with your MyCRA account and checking. If you don’t have a TFSA, why not? Stop reading, and go open a TFSA that allows you to trade ETFs, Index Funds or simply buy bonds (i.e. not a Bank TFSA which is just a savings account).

A Simple Found Money Map

Now that you have a TFSA, and you know your deposit limit, it becomes a simple roadmap for your Found Money

  • If your TFSA limit is larger than your Found Money amount?
    • Put money in TFSA, and buy a Bond Fund, Money Market Fund or whatever you full safe in buying.
  • If your TFSA limit is not large enough to deal with this amount of money?
    • Good For you!
      Put whatever moneys you can into the TFSA and invest or put it in whatever investment vehicle you wish.
    • Put the rest of the money in something else:
      • A HISA (High Interest Savings Account) if you want to be conservative
      • A trading account and again buy whatever securities, Index Fund or ETF that you like
      • An emergency account, if you think you don’t have more than pay cheques put away.
      • Your sock drawer (given interest rates might go negative, that might not be that bad an idea).

There you have it, pretty simple. Leave the money there and think about how best to use this Found Money. Some folks say wait 6 months before acting, but that would depend on the amount of the found money.


Feel Free to Comment

  1. Liz – Liz is a 30-something year old expat living in Europe exploring a more mindful approach to her financial life, learning how to code and snapping tons of photos.

    Great post! Straight to the point, which I like! It takes a mind shift change to take found money and apply it toward your future self – delayed gratification, if you will. If you can master this, and put money toward debt, a savings account or investments – it’s the best thing you can do for yourself! Of course, I also think if there’s something you’ve been needing for a while like a new computer or home repair – that’s an excellent alternative rather than putting those items on credit.

  2. The hard part with found money is that paying off a debt or investing the money isn’t exciting. Getting a new toy, going on vacation, or treating yourself feels like much more fun. I’ve always taken the approach:
    1. Debt – no brainer
    2. Set aside (invest, savings, etc.) – maybe 75% of it or more
    3. Treat myself with a small portion of it.

    Finally, the amount of found money for me also drives the decision. Great post.

    1. bigcajunman – Ottawa, Ontario – A simple blogger writing about his financial experiences as the Father of a wonderful son who is on the Autism Spectrum. Also writes about security and WordPress technology.

      Precisely. It isn’t cool to pay down debt, and you have “nothing to show for it” (I am quoting someone who told me that once). #Wow

  3. When you write impassioned posts like this, I always get the feeling that something specific in your life sparked your passion. (I know it works that way for me much of the time.) I’m guessing someone close to you didn’t pay off debt with some found money. Or … I’m way off.

    1. bigcajunman – Ottawa, Ontario – A simple blogger writing about his financial experiences as the Father of a wonderful son who is on the Autism Spectrum. Also writes about security and WordPress technology.

      Not anything specific, but a few stories I have heard, and a few issues in my life as well. You are (as usual) on target.

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