In my last post, I covered the idea of a “personal buyback program” (inspired by Joe Saul-Sehy’s “Money in the Morning” podcast episode on February 23… listen here!). Today, I’ll be walking through a few ideas for creating your own personal buyback program.
What is a Personal Buyback Program Again?
Personal Buyback Program: a plan for how an individual or family will use extra cash (expected or unexpected) to reinvest in themselves in order to create future stability, flexibility, and options.
When to Implement a Personal Buyback Program
A personal buyback program will most likely come to play when one comes upon a surplus or cash infusion. This could be planned (annual bonus), unplanned (gift, surprise savings, lottery?!?), or somewhere in between (tax refund). The goal is to create a plan for how to utilize a surplus so that if/when one comes your way, you are not tempted to spend the money without intention or thought.
Creating Your Own Personal Buyback Program
In order to create your own personal buyback program, start with asking yourself a few questions.
Is there a financial obligation that stresses me out?
A financial obligation could be a monthly payment, a debt (credit card, student loan, car loan, mortgage) or some other financial commitment. If there is one that causes stress or feels like a constant burden, this may be a great candidate for your personal buyback program.
Would I be okay if I lost my job or incurred unexpected bills/expenses?
This could be anything from “my washer broke” to “I was in an accident and have unexpected medical bills”. If the answer is “no”, your personal buyback program may include starting or contributing to an Emergency Fund. This fund acts as a safety net, allowing you to field unexpected expenses with greater ease because the money is sitting there (ideally in a high-interest savings account), ready for use when needed.
Do you have “if only” investment ideas?
“If only I had an extra $1,000, I would max out my Roth IRA or be able to start that blog.” If you have an “if only” investing or saving idea… a surplus of cash may be the perfect opportunity to reach your goal!
Is there a service I have needed, but have avoided due to the cost?
There have been several services Mr. Adventure Rich and I have paid for in the past few years which cost quite a bit of money. A few examples include creating a will and trust with a local lawyer and getting our furnace reviewed for safety and cleaned out before winter usage. Both of these items were a high priority but could easily have been delayed for years (which was the case with the will and trust!). If there is a service that is a high priority but doesn’t quite fit in the ongoing budget, it may be a great candidate for a personal buyback program.
Is there an item that would provide longer-term benefit to me?
A personal buyback program does not need to be limited to “save, invest, pay off debt”. It can include purchases too! Would a well-built, long-lasting vacuum help you maintain your home? Would new windows increase the energy efficiency of your house? Would a jogging stroller allow you to get outside more often, allowing you to take advantage of frugal activities (walking and running!) and promoting better health? Would a home espresso machine satisfy your caffeine fix, allowing you to cut out a $4/day coffee shop stop?
Tiering the Personal Buyback Program
Once you have an idea of your personal priorities, you can start to create your plan.
1. Order your program items by importance
- Put money in an emergency fund
- Work with a lawyer to create a will
- Pay extra towards my car payment
- Purchase a new vacuum
2. Assign an approximate dollar amount to each item
- Put money in an emergency fund- $500
- Work with a lawyer to create a will- $400-$800
- Pay extra towards my car payment- $500
- Purchase a new vacuum- $400
3. When an unexpected surplus comes in, start chipping away at your personal buyback program!
For example, if I were to receive a $1,200 bonus, in the example above, I would put $500 into an emergency fund, spend $500 create a will, and put $200 towards my car payment.
Do I Need to Wait for a Big Surplus to Implement our Personal Buyback Program?
No! That is the beauty of this program, it can be implemented at any time! Sure, a $1,000 bonus would certainly be a jumpstart to implementing a plan, but this plan can be chipped away at in $5 increments. Let’s say you save $30 on groceries and chose to eat at home instead of eating out during the month of March. That may lead to a $100 surplus that can go towards your Personal Buyback Program… score!
Any thoughts or questions about creating your personal buyback program? Let me know in the comments below!
Always an Adventure,
Mrs. Adventure Rich