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4 Ways to Make the Most of a Windfall

Filed under: Retirement

Withdrawing Savings Account Funds ConceptsIf you’re like a lot of people, you have just received an income tax return. Or perhaps you got a work bonus, or some other unexpected windfall. You might even be thinking, “Nope! No extra cash ever comes my way!” But the truth is, nearly everyone is the lucky recipient of unexpected cash at some point. If you make a plan to invest it wisely, you will be less tempted to blow it on something silly – and you’ll be better prepared for the future!

Try these tips to make the most of your windfall cash.

Pay off some debt. If you make only the minimum payments toward your credit card balances, you will be paying on them for years. And with many credit cards carrying interest rates of 15 percent or more, it’s tough to identify a way that investing your extra cash will be as useful as paying down debts! Pay down the card with the highest interest rate first, then work your way down. Or, roll everything into a low-interest loan, and pay on that.

Open and fund a Roth IRA. Since Roth contributions are made with after-tax dollars, your money will grow free of future taxes. The gains produced over time can be accessed during retirement, without affecting your taxable income for the year.

Teach your kids or grandchildren about investing. Even if your windfall is a fairly small one (say, a thousand bucks or so), a child has a long time to reap the rewards of growth on that money! Plus, you can use the funds as a way to teach the child about investment tactics.

Establish an emergency fund. Debt is a huge problem for many American households, and it’s all because we tend to pull out the credit card when an emergency happens. Wouldn’t it be nice to have a stash of emergency cash that you could access instead? That way, you won’t be tempted to borrow money at high interest rates, or even worse, borrow it from your own retirement fund. That’s a mistake that no one should make!

For more information on saving and investing for your future, give us a call. We can sit down with you to discuss your goals and priorities, and help you make a plan for financial stability.