Money Matters: How to Best Spend a Windfall
Jan 10, 2020Q: Recently my wife’s great uncle died and left us some money we weren’t expecting. At first, we thought of all the things we could buy for our own enjoyment. Then, we settled down and started thinking about spending the money wisely.
A few ideas we came up with were to apply the total amount to our home mortgage, pay off a couple of credit card debts, or invest in mutual funds to make the money work for us. My wife and I are waffling over what’s the best way to use this unexpected windfall. Can you help?
A: Congratulations on coming up with three smart ideas about how to best spend the unexpected cash. You should take many different issues into consideration before making your final decision about what to do with the money.
Consider these points:
- If you’re within 5-10 years of retiring and the money would actually pay off your mortgage or ensure you’d successfully pay off the mortgage before you retire, applying the dollars in that direction might be an excellent plan for it, giving you greater financial freedom during retirement.
- On the other hand, if you’re more than 10 years from retiring and you have credit card bills with high balances, it would likely be wiser to pay them off instead of the mortgage, especially if your credit cards have higher interest rates than your mortgage.
- It’s usually best to pay off the debt with the highest interest rate to avoid wasting any more of your future dollars.
- In the event you can invest the money where your expected return is higher than the interest rate of your debts (mortgage or credit cards), then investing the money would make you come out ahead in the future.
- If you are thinking about buying a new home, make certain you can afford to pay the monthly utilities and taxes on your monthly income.
You have the power to make a lasting and positive impact on your finances because of the windfall. Embrace this wonderful financial opportunity by making a smart decision.
Now go and grow!
Michelle R Russell
© The Prosperity Process, LLC
for BNB-Boss
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