What To Do with Windfall Money?
At least sometime during your life, you have likely fantasized about coming into a large amount of money. Not sure what you might do if you were suddenly to come into a large sum of cash? While it seems like a windfall would open so many doors, most people fail to think about what they would actually do should a financial windfall occur to them. Below is a guide to provide insight into your next steps should you find yourself with a windfall.
What Exactly Is a Financial Windfall?
If you have experienced a financial windfall, you have come into a large sum of money, likely suddenly and unexpectedly. Financial windfalls can come in many forms. In some cases, it could be the result of the sale of your business, an inheritance, or the result of winning money from a casino or lottery. Other windfalls may be less surprising, such as work bonuses, tax refunds, or a real estate sale.
How to Manage a Windfall
Managing a windfall requires planning and insight into your current financial situation, as well as your future plans. You should enlist the help of experts who can provide you with the information you will need to make the best decision. Another consideration to make is possible tax implications from the windfall and subsequent use of the money, which can significantly diminish the amount if not properly investigated.
6 Steps to Make the Most of Your Windfall
So now that you have enlisted your professional and considered all of the possible tax implications, there are a few simple tips to consider that can allow you to make the most of your recent financial windfall.
Create a Formal Financial Plan
Without a plan, you may easily waste your windfall or get yourself into a precarious financial situation. Start by making a list of your financial goals and priorities. Then carefully draft your plan with these goals as a basis for each decision. By having a formal plan, you will have the guidance you need to make the right decisions to get you toward your future goals.
While debt payoff may not be the most exciting thing to do with your money, it will help to alleviate financial stress. To achieve financial goals, such as an enjoyable retirement, having as little debt as possible will make the journey easier. If you have a significant amount of debt, start by paying that off first, focusing on the highest interest rate ones. This will help save you money and the stress that can come from managing high amounts of debt.
Start or Beef Up Your Emergency Fund
The unexpected does and will happen at least sometime during your life. When these unexpected financial situations occur, they can seriously affect your budget and even your future plans. So if you haven't started an emergency fund yet, your windfall is the perfect opportunity to get one started. If you have one started, but it is not large enough, adding more to it will help you be better prepared in the future. A good rule of thumb is to have five to six months of expenses put away.
Contribute to Your Retirement
Even if it seems far away, planning for your retirement should always be a part of your financial decisions. You can use your windfall to maximize your contributions each year and also protect some of that wealth with the tax breaks you will enjoy from the contributions. By putting in as much as you can as soon as you can, you will be giving your money more time to grow so that you will be financially prepared for a more stress-free retirement.
Grow Your Wealth Through Investment
Another way to increase the money you receive in your windfall is by investing it in your portfolio to allow it to grow at a more rapid rate. Do your research on various investment opportunities such as stocks, bonds, real estate, and even business ventures. Look for the right opportunities and the right level of risk for your specific point in life.
The excitement of a recent windfall may make you anxious to spend the money as soon as you receive it. Unfortunately, reckless spending can not only cost you your windfall but quickly get you into additional debt if you fail to take possible tax implications into account. Consider whether your spending will improve your assets. For example, if you need home repairs or updating, consider options that add value to your home.
Whether you are looking for the right investment opportunity or need help drafting a financial plan, the professionals at Solas Wealth are here to help. Contact one of our experienced professionals today to make the most of your recent financial windfall.