Not every financial windfall comes from getting extremely lucky and winning the lottery. You might receive a large amount of money from the sale of property, a severance package, an insurance policy or an inheritance. For some, they might never have had such a large sum of money available to them. It’s tough to know what to do in that case. For others, they may know not to spend it all in one place, but may not be sure of the best course of action. If you find yourself with this nice problem to have, here are some guidelines to follow to make the best use of a financial windfall.
Reduce high-interest debt
You may want to consider reducing any debt you are holding on credit cards, lines of credit, or personal loans. These typically have the highest interest rate so paying these off will have the biggest impact on your monthly interest costs. You may also consider making a large lump sum payment on your mortgage, as long as you can do so without a prepayment penalty. Your retirement gets a whole lot easier without a monthly mortgage payment!
Revisit your life goals
With a sizeable lump sum available to you, some life goals that you may not have been able to pursue could become available to you. You may be able to launch a business you’ve been thinking about since you now have start-up money. You and your family could purchase a beautiful lake-side cottage to make your summers more exciting. You could retire earlier than you thought now that you have money available to put into your retirement savings. The possibilities are endless.
Adjust your risk tolerance
A financial windfall may affect how and how much you invest going forward. For example, you can now consider lowering the risk level of your investment portfolio because you are no longer seeking as high of a return. One the flip side, it may give you the freedom to invest more aggressively, because having extra money will allow you to withstand extra volatility.
If you find yourself in this situation, it is important to review your options, determine your priorities, and clarify your goals and aspirations. Once you have those in orders, you should contact a financial advisor at The Beacon Group of Assante Financial Management, Ltd. Your financial advisor can help ensure that your funds are managed according to your needs and desires.
