Receiving an unexpected sum of money can be a welcome surprise, but deciding what to do with it can be a challenge. Here are five strategies to consider:
- Grow your emergency fund: A robust emergency fund provides security for financial emergencies.
- Save for retirement: Adding a windfall to a tax-advantaged retirement account can be a powerful way to potentially grow that extra money over time.
- Invest for the future: If you’ve maxed out your tax-advantaged investment options, investing through a taxable brokerage account may be the next best way to turn a lump sum of cash into long-term wealth.
- Prepay your mortgage: A windfall can make a big impact on your mortgage, depending on how much you owe. If you are considering this choice, be sure to ask your lender to put the windfall toward paying down your loan principal, which will reduce your interest payments long term.
- Donate to charity: Contributing to causes you care about is a simple way to put your values into action and do good in your community while also potentially reducing your tax liability.
Ultimately, the best use of a windfall depends on your individual circumstances. We can help you determine the best course of action as part of a long-term wealth management plan.