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Receiving unexpected money can be exciting, but it can also feel overwhelming. Knowing how to manage a financial windfall is key to maximizing its potential and securing your future – and we’re here to help you along the way.
Collected a bigger-than-expected tax refund? Gained an inheritance? Won the lottery? If you’ve suddenly found yourself with unanticipated funds, there are some essential tips you should consider to use them wisely.
7 Tips for Managing a Financial Windfall:
Find a low-risk account
A financial windfall can be a whirlwind. With all the excitement, you might feel the urge to splurge. Whether it’s buying a new car, helping family and friends, going on a fancy vacation or anything in between, try not to act too quickly! Instead, take a deep breath – and take a step back.
A smart first step is to keep your money in a safe account while you think about what to do next. Look for accounts that have low or no risk, competitive interest rates and easy access to your money. Good options to consider are a high-yield savings account or a money market savings account.
Sitting on more than $250,000? Visit a local bank to learn how to make sure your money is fully insured and protected by the Federal Deposit Insurance Corporation (FDIC).
Review your finances
Before deciding how to use the money, take a moment to think about your finances. Are you getting a regular paycheck? Do you expect any changes to your income soon? Are you saving for something big, like a house or starting a business? Once you understand your financial situation, it will be easier to decide what to save and what to spend.
It’s also a good idea to talk to a tax expert, because receiving a large amount of money might affect your taxes. Being prepared can help you meet your obligations.
Pay down debt
One of the best ways to use a financial windfall is to pay off any high-interest debts, like credit cards or personal loans. These debts can quickly add up and become hard to manage. Paying them off can reduce stress and free up money going toward interest.
Build your emergency fund
Remember, unexpected costs can still come up. That’s why it’s important to grow your emergency savings. Aim to set aside enough money to cover at least three months’ worth of living expenses. This will give you peace of mind and help protect you from surprise expenses.
Invest for the future
It’s worth reiterating: managing unexpected money can feel overwhelming. This is where a financial advisor can help you make a plan that fits your goals. Whether you want to save for college, put money in a retirement account, make an estate plan or anything in between, professional advice can help you manage and preserve your wealth.Consider giving back
After paying off debt, building your emergency fund and making important investments, think about giving back to others. This is a good time to make donations or help loved ones in need. The best part? It can be really rewarding! Just make sure your giving fits with your financial goals and doesn’t hurt your own financial stability.
Treat yourself!
Once your finances are in good shape, it’s OK to treat yourself. Whether it’s indulging in a special experience or buying something meaningful, a thoughtful reward is a great way to celebrate and stay motivated. It also reminds you that managing money isn’t just about planning for the future, but enjoying the present. You deserve it!
Managing a financial windfall is an exciting opportunity that takes careful planning. By following these tips, you can make the most of your money while staying on track with your goals.
We’re with you for the journey! Set up your savings account today, or contact us if you have any questions.
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