Most of us have at some point dreamt of winning the lottery. Or, even wondered what we’d do if someone long lost relative died and left us a lot of money.
We’ve all daydreamed about how we’d spend it, made imaginary shopping lists and thought about who we’d share our good fortune with.
For the most part, these dreams have probably been fantasy, we’re generally predisposed to dream big, and so you may have pictured yourself buying a sports car or your favorite football team. Rarely will you have dreamed of putting money away for retirement or making a series of investments?
But, while these are just dreams, idle thoughts, and make-believe plans, sometimes, unexpected windfalls to come. You may win some money, secure a large bonus from work, get money from DWI Attorneys, inherit a small fortune or come into money some other way. It might not be the vast amounts of elephantine lotto wins, but even smaller amounts, spent well can be life-changing.
When it comes down to it, and the money is real, suddenly those extravagant splurges might not seem like such a good idea. Sure, it would be great to own something that you truly love, and it’s absolutely fine to treat yourself and your friends and family if you can afford to.
But, there’s much more than you could, and should, do with an unexpected windfall before you even consider flittering any of it away. Here are some great ways to spend your unexpected cash.
#1 Buy a House or Pay Off Your Mortgage
Obviously, this depends on how much money you’ve come into and what your financial situation looks like. But, if you can either buying a house for cash, using the money to put down a deposit on a house or paying off your mortgage is an excellent way to spend your money and something that we should all be striving for.
In fact, property is that important that even if you already own your house outright, you might want to consider buying bigger or getting a second home.
A home is something that you will always need, and renting is a waste of money. Rent costs are also rising all of the time as landlord’s tax and other costs rise. If you are still renting later in life, you could struggle financially when it comes to retirement, not be able to lead the life that you are accustomed to and have nothing to leave your children when you die.
Just think if you are currently paying $700 in rent or mortgage repayments, that’s $8400 a year. Over 20 years it’s $168000 without any changes or interest. Buying a home is a large expense, but long-term it could save you a fortune and give you lifelong financial security.
Even if your windfall is relatively small, using it towards a deposit or to make an extra mortgage repayment to clear your debts faster could be a wise move.
#2 Pay Off Debts
After mortgages, credit cards are our biggest source of debt. We also have car finance, loans, store cards and student debts. Most of us have got at least one source of debt, many of us more than one. The average American household credit card debt is nearly $6000, and most homes have one. Even those that don’t really need it.
These debts cost us money. We usually pay around 20% interest on cards and loans. If you are just paying the minimum, the amount of interest you pay can be around half of your repayment amount each month, and over the lifetime of the debt, you could pay more than 100% extra in interest.
That’s why if you’ve got debts, your savings are useless. Money in a savings account, if you are lucky might be making you 4% interest. A lot less than the interest that you are paying on your debts. If you’ve got money, pay whatever you can afford off your debts before you even think about doing anything else with it. Like paying for your house, it will save you a fortune long-term.
#3 Start a Retirement Fund
If you’ve paid off your debts and you own your house with no further repayments due, your retirement is much easier. But, even then pensions and state benefits rarely make up for lost income. If you are only entitled to state pension and benefits, there’s bound to be quite a large shortfall.
Now that we’re living longer and healthier lives, we no longer want to spend our retirement years resting at home waiting to die. We want to be out there enjoying our freedom from work, spending time with our friends and ticking things off our bucket lists. All of which needs money.
So, once your debts are paid, and your mortgage is sorted, open a retirement savings account. You can either make a large deposit and add to it when you can, letting it work for you in a high-interest account. Or, start with a small deposit and set up a standing order to pay a small amount in each month. Both ways will add up in time.
High-interest accounts and property purchases aren’t the only way to make your money work for you. There are also investments. You could invest in yourself, starting your own business.
You could invest in another business that you believe in. You could purchase shares on the stock market or invest in a hot new product coming to the market. There are many, many ways to invest your money. Just make sure you hire an adviser to help you if you’re not sure what you are doing.
#5 Treat Yourself
Money is for spending after all. It’s great to have some to leave behind, and it’s wonderful to make wise investments and do things that will save you more money in the future. But, you only live once.
Be sensible, do what needs to be done, and then treat yourself to something that you want, and can afford, just because you want it. You’ll feel great!