Smart Moves To Make With An Unexpected Windfall

by News Guy on January 23, 2013

There are many people that will receive an unexpected windfall this year, either through a large tax refund, an employment bonus, or winnings from a contest or lottery.  These amounts can be significant and are often the only time throughout the year that you will have that much money available to you all at once.  Although you may be tempted to spend this money on vacations and other frivolous items, there are some smarter things that you could be doing with your newly received windfall.

Here are some smart moves that you can make with any unexpected windfall you receive.

Pay Down Your Debts

Many people are carrying large amounts of debts that are costing them hundreds of dollars in interest payments each year.  If you receive some unexpected money, one of the best things that you can do with that money is pay down any existing debt that you have.  Using the money to pay off or pay down an existing debt reduces future interest charges, eliminates the risk of late payment charges and over-limit charges, and increases your financial freedom for the future.  It is important to remember that you cannot begin building wealth until you have eliminated your debts.

Invest In A Term Deposit

If you do not have a great deal of debt and you can manage your monthly expenses effectively with your current income, you may want to consider investing in a term deposit with the money from your unexpected windfall.  The money invested in a term deposit account is deposited for a fixed amount of time to earn a fixed rate of interest for the amount of time that the money is in the account.  The interest rate earned from a term deposit is often significantly higher than what would be earned with a traditional savings account and there is virtually no chance of losing any of your money.

Boost Your Emergency Fund

If you do not have an emergency fund available or are using your credit cards as if they are an emergency fund, an unexpected windfall can be a great start to a emergency fund.  Having an emergency fund will allow you to pay for major, unexpected expenses without having to use a credit card (like for home repairs, so be sure to stock up on home insurance too from places like ANZ Home Insurance), where you could be paying interest on the purchase for years.  Your emergency fund should equal at least 3 months of normal expenses, but many people feel more secure if they have more than that available for emergency situations.

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