I’m a planner. I outline my books, I schedule my vacations, and I already know what I’m going to with my advance when (not if) I get an agent and sell my book.
Kristin Nelson’s blog really helped me out with this. She has three -make that four- posts that you should be reading on the topic.
First, and most recently, advances are hard to predict.
Second, you don't get it all at once.
You'll need to pay taxes on it at some point.
So here's my scenario. Let's say that I get an advance of 18K. Kristin Nelson threw out 25K, but I suspect those few six-figure deals skew the average, since she listed the usual range as lower. I'd be curious to see the median advance for each of those genres...
Back to the 18K. Say I get it in three parts. Now I'm down to chunks of 6K. Taxes will vary depending on your other income, and also on how big your advance is (Consult a professional!). But I think just for the purposes of idle daydreaming, witholding a third is a nice even chunk, and would end up being more than enough for me. So that takes me down to three chunks of 4K.
I think I'd set aside half of that to spend on writing related stuff - website, going to a conference, buying goodies to give away on the blog for promotion, a Nook...whatever.
This leaves me with 2K.
I'd like to tell you that I'd take my girls to Disneyland, or that I'd do something fun, but really, I'd pop that into the bank. It's nice to have an emergency slush fund because life happens. Car breaks, your kid goes to the ER, or maybe a family member picks a destination wedding and suddenly you have to spend a lot of cash or risk being branded as cheap and unsupportive :)
Because of all this, Kristin's fourth post makes a lot of sense. Don't quit your day job. Money matters - especially if you run out of it.