So, you’ve come into some money …
Whether you’ve received an inheritance, landed a new job signing bonus or cashed the gift checks from your wedding, managing an influx of cash wisely is important. Click on to learn how to make sure that your newfound wealth is working for you.
Take a moment to breathe.
Before making any rash spending decisions — like heading to the dealership to buy that Porsche Boxster — take a moment to think about how you want to direct your chunk of change. Your money will work best for you if you strategically plan its use.
Gather your team.
Call your financial advisor, tax accountant and other money experts to discuss the best ways to spend your windfall, as well as the tax implications of each option.
Pay off debt.
Prioritize paying off high-interest debt, such as credit card bills, private student loans and other pricey loans with your windfall. Many experts recommend the “avalanche method” of paying down the highest interest rate first.
Boost savings.
Receiving a windfall is a good time to boost your emergency fund. Experts recommend squirreling away around three to six months’ worth of living expenses, depending on the reliability of your income.
Consider the future.
If saving for retirement, college or a new home are priorities, consider letting the money grow in a savings account, mutual fund, 529 account or other savings vehicle, depending on your goal and time horizon.
Think about charity.
A worthy cause is another place to spend your windfall. Donate to a qualified charitable organization and claim it on your tax returns for a break from Uncle Sam.
Enjoy it.
Once you’ve considered the money-smart ways to use your windfall, it’s OK to treat yourself with the leftover moolah, whether it’s a vacation or a pair of Jimmy Choos. Just be sure to make this the last step of the spending process.
More from U.S. News
10 Smart Ways to Spend Your Tax Refund
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Spend a Windfall Wisely originally appeared on usnews.com
