What do you do when you get a large sum of money? Do you spend it? Do you stash it? Most of us won’t ever win the lottery in our lifetimes, but almost everyone from time to time finds themselves with a handful of cash, whether expected or unexpected, that is above and beyond their typical income stream. This could come in the form of a tax refund, an inheritance, or a work bonus.
What do experts recommend you do with a cash windfall? Here are a few suggestions:
- Do Nothing. The first step in managing a larger-than-typical sum of money is to sit back and do nothing. Allow yourself a “cool-off” period where your emotions settle, your rationale takes over, and you have time to think and plan. The money isn’t going anywhere, so take your time and approach the next few steps with clarity.
- Pay Debts. The next step is to pay your creditors. Whether it be medical bills, credit cards, or any other type of debt, reducing your debt load and eliminating costly interest payments is effectively an instant return on investment. Plus, it will help lessen any financial pressure you are facing.
- Have Fun. After you have settled some debts, make sure you enjoy yourself. Buy something you have wanted for awhile but haven’t been able to afford. Don’t feel guilty about it either; after all, you have one life to live and there are some times you need to just let go and live.
- Invest. Finally, learn all you can about investing. If you feel you need help, hire a fee-based financial adviser who can help guide you along a path to successful investing. It’s important to enjoy your money, but equally important to allow your money to work for you.
Bottom line, make the most of your windfall. Act responsibly but be sure to enjoy yourself. Windfalls are generally not a part of one’s monthly budget, so use it to your advantage to get ahead in life and to have fun in ways that you may not be able to the rest of the year.