Here’s What You Can Do With A Windfall
Have you ever unexpectedly laid your hands on a significant chunk of money? Suppose, your great aunt suddenly passes down quite a good sum to you as an inheritance, or you join a new company and get hold of a receiving bonus, etc. What’s the next thing that happens to you? You are simply at your wit’s end and not able to decide what to do with the newfound abundance of money? This wealth is what you call windfall. The windfall can have different meanings to different individuals. However, the windfall is commonly known as the money you had least expected or never knew you would own. Now, you have to decide what you want to do with it. Outlined below are some suggestions you can follow.
Before You Go Ahead and Spend It, Stop and Think
When out of the blue, you become rich, it’s tough for you to have control over your excitement. That’s a human instinct. You are either tempted to purchase a new car for yourself or lookout for homeownership. But before you leap, step back and think. Have you assessed your situation? Is investing a good idea? Where would you like to invest it? What if you fail and lose your money? Are you completely prepared? Making quick decisions in matters of money can be risky.
Before taking any action, just take some time, say a few weeks, to think about the present situation you are in and take your financial priorities into account. What are your objectives right now? Financial security? Future Growth? Estate Planning? Philanthropy? In the meantime, put the money in a bank account. The risk is low and you will receive interest as well. Figuring out the areas of your interest is vital.
If you want to be financially secured, you can use the money to relieve yourself of any debt. If philanthropy is what you are interested in, you can set a charitable organization or foundation. You can also make the blueprint of your estate plan. You have to decide what’s of maximum importance to you. Below are some of the most effective ways you can save, spend, or invest the sum so that you don’t feel guilty later on.
Have a Good Time
With all the money you have unexpectedly laid your hands on, you have certainly got an opportunity to treat yourself. It can be visiting your favorite restaurant and gorge on some of your favorite dishes or a vacation to a location of your dreams. It’s only you who knows what makes you happy. When you are planning out ways to spend the cash, start with a fixed amount that you can spend whichever way you want.
This will not only make you feel good and satiated, but it will also become easier for you to handle the rest of the windfall responsibly. However, with all that being said, if you want financial freedom in the truest sense, there is nothing better than saving. There is no shame in it if you want to save the entire windfall.
Pay Off Debt
Some people would rush to relieve themselves of any kind of debt with a windfall. If you pay off a credit card bill with an interest rate of 15%, it’s similar to receiving a yearly return of 15% on investment. Aside from putting a load of debt off your shoulders, you will be able to free up a greater sum every month. In case you have student loans or mortgage as your debt, you might want to utilize the windfall amount on investments, or keep it aside for your life post-retirement before you pay off the debt.
Build an Emergency Fund
You never know what’s in store for you in the future. You need to be prepared for the dark days. In times of emergency, you have no idea how much cash you would need.
Setting up cash reserves is a lengthy process and much of one’s time and effort goes behind it. However, you will run out of your cash in no time if an emergency strikes. Adding the windfall to your cash reserves will help you prepare a financial cushion for yourself.
If you know how to handle your windfall smartly, a modest sum can play a major role in your financial management. Following these suggestions can keep you strong moneywise.
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