If you just found yourself with an unexpected windfall of money, then congratulations! But coming into money can be complicated, whether it is $1,000 or $100,000. Keep the following tips in mind to make smart spending choices with your new wealth.
Stop and Think
The first thing you should do with your windfall is to put it somewhere safe while you can decide the best course of action. Find a savings account where you can access the money when you have your best plan in place. Resist the urge to spend it right away or even to give it away. Keep living on your present income while you make your decisions for the best use of your money.
Do Your Research
Is your windfall considered taxable income? Do some research or talk to an expert to find out. You want to first set aside whatever you might need in taxes, or you may find yourself with a nasty tax bill.
Set Aside the Tithe
If tithing 10 percent or more is important to you, set this money aside first. Tithing is generally done on the before taxed income. Sharing your wealth can be very rewarding. Also consider any other charitable causes you have a passion for.
Build for Emergencies
If you don’t already have an emergency fund in place, this windfall could be just the thing. Set aside four to six months worth of living expenses to guard against unforeseen bills or loss of income.
Pay off Debt
Consider paying off some of your debt. Debt usually carries interest with it, so you could be saving a lot of money in the long run. Think of this as having your money make you money. Any interest saved on debt is like having additional income. For example, if you r car payment includes $50 of interest each month, pay the debt off and you will essentially be making that extra $50 per month.
Sure it would be fun to spend your money right now, but having a secure retirement is probably more important. Figure out the minimum that you need to be able to pay for the cost of living later.
It is fine to indulge a little bit. Scale the indulgence to the funds that you have left over. This could be a nice dinner out, a large screen television or a vacation! Just don’t wind up going over budget or the windfall could cost you in the end.