Most of us dream of coming into a large sum of money. Sometimes, it’s due to something positive, like winning the lottery or receiving a stimulus check from the government. In other cases, you inherit money after a loved one dies or you receive a settlement after a car accident.
No matter where the money came from or exactly how much you received, it can be extremely tempting to go on a shopping spree and buy things you have always wanted.
Although buying a boat or that designer handbag may feel good at the moment, it isn’t the best use of your cash. Instead, find a way to put the money to work for you and your family.
Catch Up on Past Due Bills
The very first thing you should do if you come into a sizeable chunk of money is to pay off any past due bills. That includes things like your electric bills, car payment, and medical bills. You probably already know this. However, what you might not know is that you may have bills that you aren’t aware of.
Bills can be lurking on your credit report that you don’t know about. They have the potential to keep you from buying a car, buying a home, and other big-ticket items.
Do yourself a favor and request a free credit report to make sure you don’t owe money you don’t know about. If you do, pay it off so the next time you need your credit, your score can get you whatever you need.
Pay Off High-Interest Debt
If you don’t have any past-due bills to pay off, chances are, you probably have some debt to take care of. You can do yourself a huge favor by paying off your high interest debt first.
Interest can really add up over the months and years. You could end up paying hundreds or even thousands of dollars over the lifetime of your loan. You could save that money if you paid it off, or even made an extra payment or two. Just make sure there aren’t any penalties for paying off the loan early.
You may want to keep low-interest debt, even if you can pay it off. You won’t pay very much in interest charges, but it can help you build your credit score if you want to increase your number.
Buying things with the money can be a lot of fun, but it can bring you trouble later on down the road. Without anything in your savings account, a surprise bill or losing your job in the future could land you in debt that you could have faced if you would have just saved some of the money.
Saving just a little bit is always better than saving nothing at all, so put aside what you can. If you have a very large sum of money, set aside six months’ worth of bills. If something happens and you no longer have a job, you still have enough money to pay the bills while you get back on your feet.
Investing the money is always a great option when you’ve paid debts, bills, and have put plenty into your savings account!
A few ways to invest your money include:
- Saving it in a retirement account
- Buying stocks
- Acquiring ownership or a stake in a business
- Buying real estate
- Lending your money to others with interest
You could also use the money to invest in yourself. Go back to school or start that business you have always wanted to start!
Spend It on an Experience
All of these ideas are very practical, but they aren’t necessarily that much fun. If you want to have at least a little bit of fun with the money, spend it on an experience instead of stuff.
When the newness wears off, whatever you bought won’t be that exciting anymore. Not to mention, most things depreciate in value. Paying for an experience will stick with you, and it has the potential to change your life. Take a thrilling vacation halfway around the world by yourself or buy tickets for your friends to go to that big concert. The memories are well worth the money.
Don’t blow your wad on junk you won’t even care about in a few months! If you come into a large sum of money, put it to work by following the tips on this list.
More on this topic: 5 Tips on How to Stop Spending Money on Useless Stuff