You receive a sudden windfall of money — maybe it’s an inheritance, or perhaps a gift – and you may be experiencing some uneasiness. If you’ve received a large gift, you may feel uncomfortable accepting the money. If you’ve lost a loved one, you may be filled with sorrow and feel uncomfortable receiving the money.
Regardless of the circumstance or the way you feel towards it, you are likely asking yourself…well, what do I do with it?
There are a few key guidelines I would advise as you go to make the decision.
#1 – Don’t get in a rush to do something with it
This may seem silly, but it really is the most important rule. Think back to when you were growing up, and maybe it was a birthday or some other holiday when you received a nice little stack of cash from your parents. Do you remember how eager you were to spend it on something cool? Exactly. Has our attitude really changed much since then?
Until you decide, leave the money in a high-yield online savings account (if you don’t have one already).
#2 – Attack debt first
If you have non-mortgage related debt (car loan, personal loan, credit card balance, student loan etc.), consider using some or all the money to pay down an obligation you have hanging over your head.
Let’s say you receive a $10,000 inheritance, and you have a credit card balance of $3,000 with no other debt. Knock that sucker out!!!
Or, maybe you have a $3,000 credit card balance and a car loan of $9,000. You can’t knock out all $12k with the cash, but you can come pretty darn close! Even if you decided to wipe out the credit card balance, put a few thousand towards the car and save the rest, you have still made some great choices.
#3 – Consider giving
Now, you may be wondering why I am suggesting that you consider giving some of it away. Besides my firm belief that we tend to reap what we sow, the act of giving a portion of the money to a special cause or person in your life will likely release some of that uneasiness you may have been feeling. Even if you weren’t uneasy about the money, the pay-it-forward mentality can only benefit you moving forward.
Financial Goals
Once you have evaluated the guidelines, now is a great time to assess where you stand relative to some of your financial goals. Some of those goals are likely to include paying off debt (and perhaps even giving), so you are already on the right track.
Do you have a savings goal for the year?
Is there a business you have been wanting to start but haven’t had the capital to do so?
Saving for a home?
Whatever the goal, pursue it, but observe rule #1 in the process. There is no rush.