Unexpected Cash: What To Do With Your Windfall | Refresh Financial

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Unexpected Cash: What You Should Do With Your Windfall

If you’re lucky enough to have come into a large chunk of money, some unexpected cash, you want to use this to your best advantage. It’s easy to see a huge chunk of money land in your lap and want to go out and buy yourself the things you could never afford before. This is a natural response and one that every single one of us would think about. What sets the financially smart apart from those who continue to struggle, though, is the ability to put off that immediate gratification in the moment to have wealth for the long-term. Take that money, sit down and ask yourself: Do I want that smart TV now? Or would I rather have a future in which I could buy new tech any time I want?

If you think that future sounds better, here’s how you can get there:

Step 1. Pay off your high-interest debts first

This is going to save you a ton in interest over the years and if you have enough money to pay off the entire debt, eliminate one more monthly payment. If you have money leftover after paying off your high-interest debts, go on to step two.

Step 2. Pay off all other debts, in order of interest rate

Freeing up these monthly payments is going to give you more monthly cash flow and the opportunity to save money. If you have money leftover after this step, head to step 3.

Step 3. Create an emergency fund

Put six months worth of monthly payments into a high-interest savings account and leave it there as your just-in-case money. It is to be used only if something awful happens and you or your spouse loses sources of income. If you still have money left over after this step, move on to step 4.

Step 4. Invest

Find yourself a well-recommended financial adviser. Make sure you do your research here! Ask for credentials and references and once you’re satisfied you’ve found the right person, get your money working for you. Make it grow, rather than shrink. Investing your money the right way can have a huge impact on your financial security.

If you have been able to pay off most of your debt load by following these steps, you’re going to have more cash on hand each month. This is not an invitation to spend it. Instead, take all of that money you were using to pay your minimum payments and put it away in a high-interest savings account. When you reach large enough amounts, add that money to the money you are investing and make it really work for you. If you’ve found yourself with enough of a windfall to accomplish all of this, you could be headed toward a financially secure, and even wealthy future in which money is no longer an issue. You will stop losing sleep over it, you’ll have a great credit score, and you can focus on the more important things in life.

Or… you could grab that Smart TV and that MacBook Pro and that Ford F150, all of which will depreciate and eventually become obsolete, while you continue to struggle with debt and stress over money for the rest of your life.

I know which option I would choose. What about you?

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