Money Matters: What to Do With Money You Were Not Expecting
Most of the people operate with monthly or weekly incomes to sustain themselves. With an already planned paycheck, coming into unexpected money is a very refreshing feeling. Isn’t financial freedom every person’s dream?
Nevertheless, research conducted by the non-profit National Endowment for Financial Education concluded that 70% of people who receive unexpected money end up squandering it within a few years.
Some common ways to get lumps of cash are tax refunds, inheritance, court settlements, or even winning the lottery. It is natural to feel overwhelmed by receiving an unexpectedly large amount of money. So what to do with inheritance? Here are some ideas that can assist in making the most use out of the windfall:
The first thing you can do is to give back some of the windfalls to society. We are social beings, and it sure feels great to give than to receive. By donating, you pay forward for the generosity you have received from other people. The donation also allows you to claim a tax deduction when filing annual taxes.
Donating to your family is also a great way to spend 10% of your windfall. Taking your family for lunch, a weekend trip, or buying your parents dinner ensures that you spend the money on someone else. This helps strengthen family bonds.
The next best thing you can do with unexpected money is celebrating. Do something fun with the fortune. Buying yourself a gift will make you feel happy. Even though putting all your money in a financially prudent venture is rewarding, setting aside a small amount for fun is necessary.
3. Create an Emergency Fund
With the unpredictable life we lead, it is a wise decision to create a fund that is accessible in case of an emergency. Having at least $1000 in an account can save you from dipping into already planned funds for spending to cater for an emergency. It is highly advisable to have half a year’s expense costs saved up in cash.
An emergency fund protects against events like job loss, car repair, leaky pipe repair, or a health emergency. We sometimes need to travel without prior arrangements, and this emergency fund would come in handy on such abrupt, unplanned occasions. Therefore, getting a windfall allows you to set aside a fair amount of money for such emergencies without the hustle of accumulating the money over a long period. It also allows you to have a more comfortable lifestyle.
4. Pay Loans
Getting out of debt is a smart move. It is like earning money through investment, and you get to save money in the future. High-interest debts and high credit card bills should be prioritized in making payments. It is important to note it is not crucial to pay all the debt at once. You can devise a system to help pay overtime.
You should buy more time for yourself. Having a windfall allows you to buy more time. What does buying more time mean? This is the simple concept of outsourcing, getting someone else to do things you find difficult or mundane for you. It presents a rare opportunity to turn money into happiness.
For instance, getting a windfall can reduce commute, which is one of the worst time-suck activities we all have to endure. Getting an apartment closer to places you want to visit or frequent is often a great idea. Getting someone to houseclean, do grocery shopping, or even laundry can help you get more time to do things you truly would rather be doing.
By investing the money, you get to consider your future. This idea is probably the best of all. We are always thinking about and planning for our future. Be it retirement plans or buying a home to stop renting, your future is significant. Investing helps you have extra cash in the future, but it is also important to make great investment decisions.
Investing your windfall in a balanced portfolio of stocks and bonds is one great idea. Money markets and brokerage plans are also good investment plans. If you have no idea about what you would like to invest in, it is alright to save the money. Take your time and come up with some goals that will help in deciding on an investment plan.
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