Winding Up With Windfall: What You Should Do With It
Windfall gains can be both a blessing and a curse. And its fate will depend on how you are going to use it. Perhaps, you have won the lottery. You might have hit it big in the stock market. A distant relative may have bequeathed you with a large inheritance.
Regardless of your windfall situation, it is important to understand that an unexpected financial boon may change your perspective on money. Normally, people who have wound up with it think that it will not happen again, so they better spend it. Others, however, think that they will need to make the most of it cleverly because they know it may never happen again. It is always wise to fall under the second group.
However, there are many ways you can maximize your windfall. And it will all depend on your purpose or your current financial requirements. This may sound like a challenge, but you have to control yourself. Contain your excitement and start planning.
Here are some of the things that you may do with a windfall:
When you wind up with a large sum of money, you have to pace yourself. You do not want to change your lifestyle all of a sudden and attract the attention of your neighbors and distant relatives. Let your unexpected wins sit for a while. When you are too excited, you run the risk of spending all your money. But do not just relax—during this cooling period, you have to start planning. Considerations should include savings, investments, a business, and insurance.
Start paying off your debts
Having more money than usual can be empowering. You will need to use this power responsibly, and that is something that you can do by dealing with all your debts. Set aside a specific amount for paying off your debts, such as credit card debts, car loans, and home loans in Tempe. That way, your slate will be clean, and you will never have to worry about back-breaking bills again.
Choose a practical mode of payout
This will depend on the type of windfall you will get. If you win the lottery, for example, you can opt for taking the money every year. You may choose to get it in a lump sum. However, this will entirely depend on your purpose. If you are not in a hurry, you may want to just get annual payouts. This way, you don't run out of money easily.
Windfalls are meant to be spent! But again, you have to be wise. You must set aside some amount for your wants, such as travel, a new bag, or a new car. It is fun, but you need to track your spending. Download an easy-to-use spending tracker app like Mint to ensure you're living within your means. You could also follow the 50/20/30 budget rule, which states that half of your cash goes to needs like utilities and food, 30% goes to optional spending (a.k.a. luxuries), and 20% goes to your savings.
Windfalls are only a curse when you have not planned their usage wisely. But it can bring you security and peace of mind if you use it in the right ways. Knowing that it may never happen again, you have to act fast by coming up with a wise strategy. You may even ask for the help of a financial advisor to eliminate the possibilities of mistakes. Manage your windfall right and you’re jet set for financial freedom.