Welcome to Q & A Wednesday on Millionaire Habits, where I answer one of your questions every week for the benefit of over 26,000 people.
💡 Question: “Steve, I just came into some money. What should I do with all this extra cash?”
Imagine this: You just got a big financial windfall. Say it’s $100,000 (but it could be any amount). First, congrats on the extra cash! Unless it’s due to a death in the family. Then, my condolences.
How can you put that money to good use?
Let’s find out.
What should I do with a big financial windfall?
Before you think about blowing it on a new car (or even shoving all of it into the stock market), there might be better ways to use that extra cash.
Here are the top 7 ways to use a windfall (in order of importance):
1: Pay off debts. First things first, tackle those pesky high-interest debts like credit card balances or personal loans. Reducing debt will free up your finances and save you money on interest payments.
2: Pad (or build) an emergency fund. If you don’t have money set aside for a rainy day, now’s the time to do just that. Take at least 3 months’ worth of living expenses and throw it into a savings account. Don’t touch it unless you need it.
3: Perform car/house repairs. Roof leakin’ a little? No more tread on your car’s tires? Need to replace that noisy washing machine? Now’s the time to take care of repairs you’ve been putting off because of money concerns.
4: Acquire new skills. Invest in yourself through education or skill-building. It could be taking courses to improve public speaking, attending workshops, or learning about personal finance to make informed decisions with your money.
5: Save for retirement. If you haven’t already, allocate some of the windfall towards retirement savings. Compound interest works wonders over time, so the earlier you start, the better off you’ll be in the long run.
6: Give to charity. Giving back to causes you care about is fulfilling. Consider donating to reputable charities or supporting local community initiatives.
7. Have a little fun. You deserve to enjoy some of that windfall but don’t go overboard. Set aside a small portion to indulge in something special or a dream experience, but do not blow it all on extravagant purchases.
There is no ONE right answer to this. But let’s be honest: some answers are better than others. Don’t blow all that extra cash on something you’ll regret.
It’s okay to enjoy some of it. But keep yourself honest. After all, you’re reading Millionaire Habits because you want to improve your financial health, not struggle through life wondering where all your money went. Right?