Recently, you may have received a stimulus check, bonus check from work, or another unexpected source of cash. Moments like this don’t happen often, and you want to make the most of your good fortune. Unfortunately, you may have trouble deciding on the best use of your windfall. Here are several ideas to consider:
Focus on Your Financial Goals
Chances are, you have a financial goal or two that you’re working toward. If so, you can use your influx of cash to help reach the finish line for that goal. What if you don’t have a specific financial objective? Now is a great time to think about one and put money towards it. For instance, you can save up for a down payment for a house or car, save up for a vacation, or take care of routine car maintenance.
Loosen Up Your Regular Income
You could have debts leeching away at your regular income, such as credit card debt, a car payment, or back taxes. You can free up more of your regular income by using your unexpected funds to pay down your debts. Think of how freeing it would be to eliminate just one of your longstanding monthly bills. You can use the money you once spent on one debt to speed up paying off another. While it may seem as if your monthly financial obligations are unchanged during this process, the reality is that you can pay more than your regular monthly bill for a remaining debt, allowing you to pay another debt off faster.
Put Money Into a Savings Account
Experienced financial professionals like Mark Stevens will tell you that financial emergencies are inevitable. You may not know when such an emergency may strike or how massive it may be, but you can better your chances of weathering the storm by having an emergency savings account. Say that you were to suddenly lose your job, incur an expensive car repair bill, or have a medical emergency that your health benefits don’t cover. An emergency fund can go a long way in keeping you from incurring massive debt. Even better, just knowing you have an emergency fund gives you peace of mind in your day-to-day life. Consider depositing a generous percentage of your windfall into an emergency fund. Your future self is sure to thank you.
Outsource Household Chores
While necessary, you may dread common chores like housekeeping, grocery shopping, or doing the laundry. It could be the time that these tasks require that makes you despise them so much. No matter why you’d rather not go to the grocery store or separate whites from colors, you can use your money to hire someone to take care of the job for you. Even if you can only afford grocery delivery or a professional cleaner for a short while, that’s still time you get back. Now you have more time to engage in activities and pastimes that bring you joy and happiness.
Invest in Your Business
You could have your own business, work as a freelancer or independent contractor, or have a side hustle. No matter which category you fall into, there’s a good chance that you can use your unexpected money to improve your operations. A new piece of equipment or technology, a source of working capital, or even marketing funds could help you take your venture to the next level. Even paying quarterly taxes makes for a smart business move.
Save for Retirement
Of course, you cannot go wrong in putting some (or all) of your extra money into a retirement account, no matter how young you are. Even if you have a 401(k) through the company you work for, there is no harm in setting even more money aside for your golden years. One thing to keep in mind about your senior years is that the elderly often experience several medical and health conditions, which can become rather expensive. Rather than spend most of your retirement funds on visits to the doctor and medical bills, wouldn’t it be nice to have a portion of your retirement set aside specifically for any medical conditions you may have to deal with in your older years? Even if you remain in good health, the extra money won’t go to waste.
Determine If You Have to Pay Taxes on the Money
Depending on the source of your money, there’s a chance that you have to pay taxes on it. Do some research to determine whether this true. If it is, use a portion of the funds to take care of taxes. This may be the last thing that you want to do, but doing so is better than having interest and fees added to any taxes you’ll eventually have to pay.
You have plenty of options for what to do with surprise income. To help make the right decision, focus on what offers your future self the greatest sense of peace.