Who would not like to win the lottery? Who would not like to see Publishers Clearing House show up at their house or workplace? Just about anyone would enjoy a large financial windfall. Most will come in the form of an inheritance, but other sources like a payout from a lawsuit or a state lottery are also possible. Here are six good ways to avoid wasting a windfall as fast as it comes.
1. Pay off Credit Card Debt
A financial windfall can be a great means of paying off credit card debt. Credit cards can be some of the most expensive debt that people carry. They continually accrue interest beyond the initial debt, meaning the longer you hold the debt, the more you will eventually have to pay off. Therefore, the first debt to be paid off should be the credit cards.
2. Pay off a Home
Another great way to handle a windfall is by paying off a house. If the windfall is large enough, it can be possible to remove the largest monthly payment off a budget. Of course, there are tax ramifications for paying off a home that are related to the mortgage interest exemption, so you should seek a bit of advice before you decide to go through with it.
3. Buy a Vacation Home
A vacation home can be an expense or it can actually be an investment. Most families can only take a few weeks of vacation a year. Why not buy a condo in a desirable vacation area and rent it out for income the rest of the year? The vacation house would be able to practically pay for itself after the initial investment. A windfall can make this a reality.
4. Save for Retirement
For those who are in good financial shape, a windfall can be a great way to make it even better. Putting the money in a tax-sheltered account like a traditional IRA can be a good way to defer the tax liability on a smaller lump sum. It can also help the retirement years be more comfortable.
5. Start a Business
An unexpected infusion of cash can be a good excuse to start a business. Those who can be successful in their own business can frequently make more money than those working for someone else. A business that will residually bring in funds can be a great investment of your money that will continue to pay off long-term.
6. Give Some Away
When it comes to pay taxes at the end of the year, it can be beneficial to check with financial or investment experts to see if donating to charity can cut tax liabilities. Giving some money to charity can be a win-win. The giver can cut tax exposure, and the recipient can help others.
Getting a windfall can cut down on a great deal of stress. Those who are able to plan carefully can make the money go a long way. These tips can help in the long run.