A sudden windfall is exciting, but it can also be overwhelming without taking some crucial financial steps.
Receiving a large, unexpected sum of money is exciting, but it can also be overwhelming. Depending on where the money is coming from, it can stir up a lot of different emotions, and make you want to save it (or spend it) a certain way.
If you find yourself in this situation, breathe, take a step back, and consider these three things.
Multiple Payout Option
Receiving the funds as multiple payments instead of one lump sum might help ease you into a lifestyle you aren’t used to. It’ll help you decide where to save and spend your money and give you time to think about your financial goals, which will probably change as the years go by.
Create a Financial Plan
Your financial plan should start by outlining your future goals, such as eliminating debt or saving money for a college fund. Next, figure out how your new earnings will factor into these goals. For example, will you still need to apply part of your paycheck to certain savings? Will you reach your goals in five years instead of ten now?
If you already have a plan in place, update your budget with your new earnings, and consider applying additional money towards your goals so you can reach them faster.
Buy a Home
Now is a great time to start thinking about buying a home. If you’re not ready for one just yet, set money aside for a down payment and start earning interest on the amount.
Already own a home? Pay it off and add your monthly payment amount to savings or an investment instead.