June 21, 2024
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Got a Financial Windfall? Here’s What to Do

If you’ve just received a tax refund, an inheritance, a bonus at work or another unexpected windfall, you might wonder what you should do with it. Below are a few things you should consider.

Taxes

First, find out whether there are tax implications associated with your windfall. The last thing you want to happen is to spend it all and then find out you owe thousands of dollars in taxes on it. For issues like this, it’s best not to rely on the advice of people you know or people online. You should check with a financial professional to find out how to proceed since the state you are in and the nature of your windfall can complicate the answer to this question in many ways.

Financial Obligations

Do you have any major financial obligations you need to take care of? While it can be tempting to go out and splurge on something that you really want, if you have a big debt or if you don’t have any emergency savings, you may need to put your windfall toward that. As a compromise, if you don’t want to use it all for debt and savings, you can always set aside a certain amount to spend on yourself. On the other hand, it might not be advantageous to pay off a mortgage all at once. This might also be something to discuss with a financial professional before making a decision.

Splurging

If you do decide to spend some or all your windfall, there’s still a lot to ask yourself. Do you want a memorable experience, or do you want a possession? Is there something you’ve had your eye on for a while but assumed you’d never be able to afford? Or maybe there’s something you don’t even realize yet that you want. Let yourself daydream a little bit. For example, if you haven’t thought about riding a bike since you were a kid, you may be excited to learn about e-bikes. With a throttle that reduces the need to pedal, you can take it easy when you feel like it but get all the benefits of cycling when you want to as well. Alternately, perhaps you want to spend a lot of money on an item of designer clothing, have a meal at a Michelin star restaurant or use the money as a down payment on a home.

Investing

Investing is another possibility if you understand what to consider, and because this is a windfall, you might want to be more adventurous with your money than you might be with your regular income. However, you don’t have to be, and you could also use it to pick up some stock that are likely to perform well over the next few years or decades, to set up a retirement account if you don’t have one, or to invest in mutual funds or a similar low- to moderate-risk investment. You could also look into other types of investments, such as cryptocurrency or even becoming an investor in a startup.

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