With various challenges to overcome, keeping your finances in order, you may sometimes feel as though the odds are stacked against you.
Put out one financial fire at home, and another pops up, requiring attention. Finally put by savings for summer holiday, and an unexpected repair bill sets you back. Get a raise at work, and the landlord ups the rent. If any of these personal finance scenarios sound familiar, you may be frustrated, striving to make financial headway.
What if you had a different kind of financial problem, wondering where to put your money, rather than worrying about where you’ll get the cash to pay for the next round of spending?
If you’re like most people, financial windfalls come your way less frequently than bonafide financial crises. Benefitting from a sudden windfall may seem like a rare occurrence, but don’t count yourself out too soon; you may yet need to account for an unexpected cash influx. When a sum of money does come your way, it’s important to handle the cash properly, or risk squandering the windfall.
What Should I Do With This Money?
A financial windfall can help prop-up lagging financial fortunes and/or protect your financial future. However, if you handle the money improperly, you may end-up losing the benefits of a sudden cash infusion.
An unexpected influx of income may arise from positive circumstances, such as a lottery win, or with great loss, in the case of an inheritance. The amount of money in question may be relatively modest or life-changing. The last thing you want to do, in either case, is diminish opportunities presented by a financial windfall.
Coming into a sum of money can help stabilise your finances, pay off bills, and provide a financial safety net, for future spending demands. Getting a flexible short-term loan can also help when fast cash is needed – even with bad credit. But a windfall doesn’t require repayment, so you can enjoy the money without payback worries. Finance Girl recently shared a few of her smart tips for managing a financial windfall.
Hire a Financial Management Firm – Unless you work in the finance industry, you may not have the skills and experience required to effectively manage a sudden influx of unexpected cash. Consulting a professional asset management company takes the guesswork out of investing and allows you rest assured your financial interests are protected. With your personal financial ambitions in mind, a professional wealth counselor can offer advice and recommendation to make your money work for you and achieve your finance goals.
Wipe Debts and Pay Taxes – Your debts and tax obligations are not going away, so why not use a sudden windfall to pay down debt balances and settle-up with the taxman? Your cost of living immediately decreases when you become debt-free, so it makes sense to eliminate interest charges by paying off debt with newfound funds. Don’t overlook tax obligations when you come into money – inheritance and other taxes may be due.
Make an Emergency Fund – If you’ve been operating without adequate emergency savings, a sudden financial windfall may be the leg-up needed to fully fund your household rainy-day account. Much of your windfall may be earmarked for long-term investments, but you should also stash some of the cash for emergencies.
Plan for Retirement – If there’s enough money to work with, a pension scheme may provide a suitable investment for a portion of your unexpected payout. Your age, income, and contribution limits all influence pension decisions, so you should approach the proposition with your financial advisor, for timely information and guidance.
Don’t Do a Thing – Hasty decisions can set you off in the wrong financial direction, so it pays to step back, before jumping into a poor investment or savings strategy. You’ll ultimately make moves with the money, but taking time to plot your course ensures you don’t overlook important details or misallocate windfall proceeds.
After facing financial shortfalls time and again, managing a windfall may feel like a refreshing opportunity. Before putting the money to use, consider seeking professional advice. A trained finance expert can help you allocate your financial bonus, including creating an emergency fund, paying off your debts, investing in a pension scheme, and other prudent possibilities.