Finding yourself in the midst of a major windfall can leave you asking yourself many questions. Should I pay off my high interest debt, save it, or spend it? Before making any decisions, consider a few options that can leave you in a better spot from whence you started.
Is Your Financial House in Order?
Before making any decisions as to where your windfall can be best spent, it is crucial to do a thorough analysis on your overall financial situation. If there is any high-interest debt, this should be made a priority. Furthermore, an emergency fund is always recommended. The Best Savings Accounts can help you get started with your emergency fund. It is advised to have at least three months of emergency savings on hand. In addition, There are multiple sources in the news that state that mortgage rates are at an all time low.
Determine Your Investment Goals
If you are in the position to invest, it is first advised to determine what your investment strategy should be. The best way to do this is to consider what you are investing for. What are your short and long term goals for this money?
- Short term – These include events that you need to plan for that are less than five years away
- Medium term -These include anything that falls from 10-15 years.
- Long term (15+ years) – Are you ready for retirement?
The first thing that you need to do is a thorough analysis of what your goals and needs are. Depending on what these include have a factor on what types of investment vehicles you should choose from. If your financial house is in order, perhaps a good avenue is to put a down payment on a house.
You do not have to fall victim to a major windfall like the stories you hear of lottery winners or beneficiaries of estates. With careful planning and foresight, you can avoid many of the detrimental outcomes that arise from coming upon a large amount of money. Despite that the fact that careful planning is necessary, always find something to spend your money on that will be used for your happiness.
I don’t expect to ever win the lottery, since I never play, but I will probably get a portion of my mom’s estate. I am not counting on anything, but since I am the executor, I have a good idea of what she has. If we get a windfall, we will just funnel it into our current investment asset allocation and figure we are that much closer to retirement.
How do you know you are the Executor? Did she have a conversation with you about the topic?
I have been conversing with my parents in my role as executor since they asked me to be their executor about 20 years ago. My dad passed away 7 years ago, and I helped my mom with dividing their assets into an AB irrevocable trust at that time. She now keeps me up-to-date on all of her accounts and possessions.
We’re getting close to some sort of a windfall, when my baby will be born. For 24 months we’ll receive some money from our State for her. It will be saved directly, no questions asked. If you have a budget and are very clear with your goals, it’s difficult to become a ‘story’ of someone who squandered money, since everything is well planned for. Any money we can get ‘extra’ will go to our savings.
Where are you from that the State provides for her after being born?
remember, the probability of you winning the lottery is *almost* exactly the same whether you do or don’t buy a ticket – so it is irrelevant to specify whether you play or not
Of course but I don’t think that is the point of the post.