Every year, at the end of the winter, I stick a $20 bill in my coat pocket. I put my coat away, and forget about the money and my coat all winter long. When December comes howling around, I pull my coat back out and to my delight, I find FREE MONEY! I spend it on coffee.

Doing this once a year, isn’t a problem. After all, what is life without whimsy? The problem that I face is that anytime I waste all my “Free Money.” Rebate in the mail? Free Money. Sell something on Craigslist? Free Money. Side hustle paid in cash? Free Money. Birthday money? Free money.

Spending “free” money never seemed like a big deal to me, until the year that I received a tax refund. It was the first year that my husband and I filed joint taxes. Because I always worked side jobs, I was accustomed to owing the government money every April 15th. However, my husbands tax withholding more than compensated for my extra earning, and the government promised to return our money.

“What are we going to do with our free money?” I asked, dreaming of a vacation.

“I always max out my Roth as soon as I get my tax refund,” he said.

You don’t have to spend free money

“Oh. That’s… sensible,” I replied.

My husband treated free money the way he treated all money. He put it towards our most important financial goal, investing in our retirement accounts.

His idea made all the sense in the world, but I never thought to direct free money towards important goals. To me, “free” money triggered an impulse to spend. I hadn’t trained myself to think otherwise. Behavior finance experts call my thought pattern mental accounting. It means that humans treat money from different sources differently. People spend Found Money more freely than money that they expect to receive (such as a paycheck). But, that doesn’t have to be the case.

If you train yourself, “Free” money helps you achieve your goals. In fact, time and again, we’ve seen clients at the financial gym achieve some of their goals because of found money. Without the proper mindset, the money might have been wasted, but a goal-orientation helped these clients point their free money towards their goals.

Whether your primary goal is to invest for retirement, pay off student debt, or build an emergency savings account, you can use your found money to achieve your goals.

Mental Tricks for dealing with your Free Money Dilemma

If you’re like me, and tempted to spend found money as soon as it comes into your hands, these are a few mental tricks to help you direct it to your goals instead.

  • Keep found money out of your wallet and out of your primary spending account. Wait until your next budget to decide what to do with the money.
  • Consider creating a “Found Money” Account. Track every penny of found money for six months and then direct it to your top goal.
  • Clarify your top financial priority. A compelling goal defends against wasteful spending.

It’s hard to overcome the temptation to treat money from different sources differently, but with the right mindset you can do it.

What is your best trick for handling free money?