We all dream about winning the lottery or getting that extra bonus, but what if you win the lottery or that bonus? How will you invest $1,000,000 or even $100,000? Chances are that you are tempted to consider buying a new property, the hottest car, or just want to head on a dream vacation. However, it is always better to think things through and consider what you should actually be doing with the money from the windfall.
What Is A Windfall?
In the simplest of words, a windfall is an unexpected, huge financial gain. It is often a result of winning the lottery, salary bonus, property sale, lawsuit settlement, or even an inheritance. A windfall could be in the form of an unexpected $1,000 to as much as a million dollars or more. Retirees across the globe aim to leave an inheritance of $148,000 for their children. It is also common for people to give that money to their kids before their demise. As much as 35 percent of working adults in America have received about $25,000 from a relative.
So What Should You Do With Such A Huge Amount Of Money?
The key to making the most of your windfall is being smart about how the money should be invested. It could be in the form of a monthly budget or an early retirement. You have to carefully plan to make the most of the windfall. The following are some of the ways you can invest money you receive from a windfall.
One of the smartest things that you can do when you receive a windfall is to put the money in a short-term account such as CD, money market account, or savings account. Do not use the funds until you have decided how to best utilize the money. When you set the money aside for a few months, it helps clear the temptation to spend the funds. You can develop a financial plan by hiring a financial planner in the meantime.
When you get a windfall, you would also need to pay tax on it. You will incur state or federal income taxes, estate taxes, or capital gains taxes on the amount. It means that a portion of the windfall would go straight to the government. This is why it is crucial to know how much you would need to pay in taxes as soon as you receive the funds. Hence, it might be best to hire a tax specialist or CPA to help you calculate how much you owe in taxes.
To invest the money in the best way possible, you have to eliminate consumer debt. Pay off those high-interest student loans and credit card debts. Besides, you must maintain a healthy credit score.
Make sure to create an emergency fund as it is very important. You never know when things could go wrong which is why it is always a good idea to have an emergency fund to cushion you.
Finally, once you have set money aside and paid your taxes, it is time you funded your career or business with the money you have left. You could also invest in long-term savings.
This post aims to help you invest your money right. Use it as a guide to carefully manage your windfall.