If you’re like most people, you’ve fantasized about what you would do with a surprise windfall. It can be fun to think about finally buying that boat, or indulging in a lavish vacation, or upgrading your kitchen. We’re not saying you should never consider these things, but if a windfall does drop into your lap, it would be wise to consider how that money could be used to establish a more secure future.
Right now, you might be deciding what to do with your tax refund. Or perhaps you will receive an inheritance, a work bonus, or some other unexpected sum of money. The following actions might be a smart decision, for which you will thank yourself later.
Go debt-free. Paying bills doesn’t sound like the most fun thing you could do with a windfall. But since credit card debt could cost you a small fortune over the years, paying it down faster results in more savings over the long run. And imagine how great it would feel to live free of debt in retirement!
Establish a rainy day fund. In the event of an emergency, how would you cover a large expense? With liquid resources in a savings account, you won’t be tempted to put the expense on a credit card, or worse, borrow from your retirement account.
Invest in yourself. What is holding you back from a raise at work? In some cases, additional training or certification is the ticket to a promotion. Investing that windfall in yourself could result in a higher income down the road. For the self employed, options like upgraded equipment or a comprehensive marketing plan could be the ticket to increased revenue.
Increase your retirement plan contribution for the year. If you aren’t already maxing out your contributions each year, putting that windfall in your 401(k) or IRA can help you earn a better tax deduction. Plus, that money will grow tax-free for years.
Donate to charity. It’s not exactly an investment, but donating to charity can help you earn a valuable tax deduction.
If you ever do receive an unexpected windfall, the most important thing to remember is to avoid hasty decisions. Give us a call, and we can help you weigh your options before investing that cash in your future.