Well, it’s windfall season, and many people are looking forward to a double bonus this year. Not only might you be getting a tax refund, but that third stimulus check may be heading your way at the very same time! The big question is “What do we do with it?” Of course, there are any number of things you can do, and a lot of what you do may ultimately depend on your personality. Are you a spender or a saver? The great irony here is that the very people who might need to be saving that money (because they have a history of spending) are the ones who may choose to spend it, whereas the natural savers (who are already in good financial stead due to that character trait) are likely to save this money too. So let’s have a run down here on what you should be doing with the money, depending on your individual financial circumstance at the current time. Here is an easy-peasy priority list that you can run down anytime a big fat windfall check comes your way that will give you the best bang for your buck in getting ahead with your finances (which hopefully is your ultimate goal here): 1. Are you current with your bills? If you are not, then this is what you need to use this money for. If this is a struggle for you then it will have to go to your most dire needs, and that’s that. My heart goes out to you during this trying time and I hope as this crisis gets better your situation will improve accordingly. 2. Do you have any debt? Then, by all means, pay it off (or at least down). Start with your smallest debt and pay them off smallest to largest until you have used up all the money. Bonus! Maybe this head start will give you the incentive you need to get serious about continuing on to pay the rest off. 3. Do you have an emergency fund (of three-to-six months-worth of expenses) saved up? If not, put it towards that. Put this in a separate account away from your everyday saving/checking accounts. And again, maybe this will be incentive to keep going and fully fund it! Plenty of people found out this year just how important it is to have one! 4. Do you have any big financial goals you are working to save up for? (a car, education, a wedding, a house, a home repair, or improvement project, a vacation, etc.)? Put it toward that. Open up an online bank account (separate from your everyday account), put the money in there and set up automatic monthly payments going into it to continue funding it until you reach your goal. If this goal is a more long-term savings goal (more than five years away) then you might want to buy a mutual fund to make your deposits into for a greater rate of return on your money. You can do this by opening up a discount brokerage account (such as in Fidelity). 5. Do you have a mortgage? Pay that down (or off!). You do not want to get to retirement age with a mortgage still hanging around your neck. And the faster you can pay it off before retirement the more time you will have to save even more money towards that golden retirement nest-egg! And the less interest you will pay on it in the long run! 6. Retirement. If you are good on all of the above then there is nothing wrong with adding this money to your retirement account, or starting a new one. I know, I didn’t give any “spending” options in this list, but hey, I’m a budget coach. We teach people how to save their money. So, I guess if you are on nice solid financial ground on all fronts and you want to take this money and spend it on something then what can I say? But whatever you do, please put the money to good use. If you really don’t need it at all, maybe you could donate it to those that really do. This prioritization schedule can be applied to all windfall money that comes into your life at any time for whatever reason. It is very easy to go down the list, see where you are with your finances and know exactly what to do with it. I hope this helps! As always, wishing you all a very bright financial future!
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