How Will You Spend that Windfall? 5 Smart Moves
June 3, 2013
One of the first instincts when you experience a windfall is to spend it â€“ and spend it quickly.
This is because a windfall is considered “extra” money. It falls outside your regular financial plan, so you end up spending it in a way that doesn’t fall into your finances. This isn’t always the best approach, however.
Whenever you get windfall money, it’s a good idea to consider how it can help you improve your finances. Think about what you would do with a windfall ahead of time, and you can fold it into the rest of your financial plan.
Here are some smart ideas for spending your windfall:
1. Boost Your Emergency Fund
If you have been struggling lately, now can be a great time to boost your emergency fund. If you have been depleting your emergency fund, a windfall can replenish it. Even if you haven’t seen a reduction in the size of your emergency fund, it makes sense to give it a little boost. Use your windfall to better secure your situation.
2. Increase Your Retirement Account Contributions
Still have room to max out your retirement account? You can get an even better boost by contributing to your tax-advantaged account. Your money will work more efficiently on your behalf, providing you with better returns for your buck. Your future self will be glad that you put a portion of your windfall toward your retirement.
If you qualify for an HSA, consider making a contribution there. Not only will you get a tax deduction, but you will also see tax-free growth for your money â€“ as long as you use it for medical expenses.
3. Help Someone Else
One way to feel great, and make a solid investment in your community, is to donate to charity. Take a portion of your windfall and donate it. You’ll get a tax deduction, and you can help those in need, creating an investment in a better world. You can even set up your own charitable foundation, if the windfall is big enough. Think of ways to help others with your windfall, and you’ll feel the benefits of good karma.
4. Get the Most Bang for Your Buck
In some cases, it makes sense to use your windfall money for purchases â€“ as long as you planned to make them anyway. If you know that you expect to purchase a flat-screen TV, use your windfall to get one when it’s on sale. The same is true of a computer, or booking a vacation you have meant to take.
Hold your windfall in reserve while you shop around for the best price, or while you wait for a good sale. Don’t feel like you have to buy immediately; sometimes waiting for a better deal can help you get more for your money. That means your windfall will go even further.
5. Invest in Yourself
One of the greatest investments you can make is in yourself. Use your windfall to improve your own ability to make more money. You can take classes, get a certification, or even just buy some inspiring and helpful books. Figure out what you can do, on your own, to increase your earning power. Then, use your windfall to invest in yourself and your own abilities.
Do More with Your Windfall
You don’t have to do just one thing with your windfall. Depending on its size, you might be able to do more than one thing. Prioritize what you want to happen in your life, and make sure that you apply your windfall to the most important items first. You might be able to boost your emergency fund and take the necessary classes to earn a certification that will net you a pay raise.
Consider what you want to have happen with your life and your finances, and then commit to use any windfalls to achieve your goals faster.
What would you do with windfall money? Leave a comment!
All posts by Miranda