What would you do if you woke up one morning and you were told that you were going to get $10,000? The money could come from an inheritance or it could be a gift. One of your aunts, who didn’t like you that much, might have left you the money when she passed away. You could have won the amount from some contest that you forgot that you even joined. What would you do with the money?
Getting $10,000 isn’t a joke. It’s not like finding a dollar bill on the street. Getting that amount does not mean that you would ever need money again, but no one would say that $10,000 is a small amount of money. Just imagine what you could do with that. Most people would think about what they can buy with that money. But spending all or most of any financial windfall that you might get by buying things is not a good financial move.
Think of a financial windfall, no matter where it came from, as an opportunity to set your personal finance on the right track. It’s like getting a second chance to do things right. Even if you have committed mistakes in the past, getting a sudden source of money that you did not expect is an opportunity to correct some of those mistakes. If you just spend it on buying items that you wanted without thinking then it would go to waste. You would be throwing away an opportunity to set your finances on the right track.
Knowing how to use a financial windfall properly becomes even more crucial if you are actually in a debt problem. That makes it even more urgent that you should know how to use that sudden money source in the right way. If you do not properly use your windfall, you will be in the same situation as before you got it.
You should have a plan on how you will handle receiving unexpected cash sources. Whether they would be worth $10,000 or smaller, having a clear plan on where that extra cash would go can go a long way in setting your finances in order. Here are some ideas that you can use on how you can handle financial windfalls that you might come across:
Treat Yourself and Your Family
Ideally you should not use the windfall that you might get on non-essentials, but who are we kidding? You would want to use that money to buy things that you like. You would want to treat your family to something nice. It’s okay to use getting a financial windfall to get a treat for you and your family. There’s nothing wrong with that. You just have to make sure that you limit the amount that you use for the treat. It’s okay to use 5% of the amount that you get on treats. It does not matter what you spend it on just as long as you limit it to 5%.
Pay Your Taxes
For some possible sources of your financial windfall, you might have to pay taxes. When you learn that you will get the money, you can try to find out if you have to pay taxes. If you end up spending the whole amount and you owe taxes afterwards, you could end up in trouble. Consult a tax professional to find out if you need to pay taxes and how much you would owe.
Pay Your Debts
If you are in debt and you will be getting a financial windfall, then this is your golden opportunity. This is the chance that you have been waiting for to set things in order. You should prioritize paying off your debts when you get hold of a financial windfall. By paying off your debts you would have a clean slate. You might not see it that way now, but by paying off your debts you would get the greatest amount of return. It would also free up your cash flow. Money that has been going to paying off interests of your debt could be used for other things.
More importantly, when you are able to pay off your debt, it would give you an immense psychological relief. Do not underestimate the good feeling that you can get from that.
Fix Your Problems
Money can do a lot of things and it can certainly be used in order to improve lives if used in the right way. If there is anything in your life that needs to be fixed, then you can use the financial windfall in order to take care of it. If you have some health issues for example, then you can use the money to get that fixed. If you have been putting off a medical or a dental procedure, now is the time to take care of that.
Deposit the Rest
It can really be tempting to start spending the money on some of the nice things that you have always wanted in life. But don’t go out right away and splurge the money that you will get. When you still have money left over after you have paid off your debts and taken care of the things, don’t go out and use up all the money right away. Take the time to stop and pause in order to think about what you really want to do with the money.
Open up a new savings account for the amount. Make sure that it is not connected with the other accounts that you have. It should not have an ATM card or an online access too, so that you cannot use the money to buy things.
Make a List
Give some time so that the initial elation of getting that windfall would pass. What you want is to let that elation to pass. Live just as before you had the windfall and then do your research. You might have some unrealistic expectations about what your money can do for you. Find out what it can really do for you and what it can really buy for you. When you know how much your money can do, create a list of the things that you want to get for yourself and your family using that money of yours.
Invest for the Future
It would be up to you how you would spend that money of yours, but the smartest way to use it would be to invest it so that it will earn even more. That is one way of preparing for your future. By investing the money your fund would grow and can act as a safety net for you in case something goes wrong. Consult a professional when you have decided that you want to invest your money. That’s one way to make sure that your money will not get wasted.
If you get a financial windfall then you’re lucky. A lot of people will only dream of getting that but would never see it become a reality. That’s why you should not waste that opportunity and throw away the chance to make good out of it. You have to see to it that something fruitful will be the result of you getting that financial windfall.