Tim Thompson of Centaurus Financial recently shared this information in his newsletter, and I thought I’d pass it along through this blog post.
If you were to come into a sizable chunk of money, such as an inheritance, what would you do with it? If your answer is something like “quit my job and buy a sports car,” you may want to reconsider. A spending free-for-all might be fun, but you could end up back where you started. A carefully managed windfall, on the other hand, could benefit your finances for life.
So what should you do with the money?
1. Tuck it away. Unless you already have a sound financial plan, the best thing to do with a windfall is tuck it away in a low-risk account until you do have a plan.
2. Pay off “bad” debt. Balances on high interest credit cards are considered to be “bad” debt: You’re paying a lot of interest and not getting anything in return. If you have credit card debt, use some of your windfall to pay your account balances in full.
3. Pump up your rainy-day fund. Put some of your windfall aside for emergencies — six months’ worth of expenses, if you can.
4. Plan for the future. Direct some of your newfound cash toward your long-term goals, such as putting your kids through college and a comfortable retirement.
5. Splurge! Once you’ve taken care of these financial priorities, go ahead and spend some of your windfall.
If you need guidance and how to handle your financial matters, Tim can be reached at (310) 792-7032 or [email protected].
Candy
