5 Things To Do With an Unexpected, Large Cash Gift
While it would be great if we could have enough money all the time, this isn’t possible for most of us. Usually, we have to exist on a regular budget, and sometimes if we’re lucky, we can expect a yearly bonus or our tax refund. Occasionally we may receive a windfall that is quite substantial due to a legal settlement or an inheritance.
When you receive a large amount of money that is unexpected, it can be a great opportunity to pay off debts, invest, or save for retirement. Often the monetary gift can come with the sad news of a loved one, and using the money wisely can be a great way to honor your relative or friend. There are so many options, though, that it can be difficult to figure out what is best. Here are a few ideas to get you started in case you are in this situation now or in the future.
1. Pay off debt
Paying off debt first isn’t right for everyone, but if you have high-interest debt such as credit card debt or a variable home mortgage loan, you should pay those debts immediately. You can also look into paying off car loans or students loans if you have no higher-interest debts. If the money you receive is a large amount but not enough to pay your debt off completely, then you may want to pay off your debt with the highest interest and then set aside the rest.
If you don’t have an emergency fund, you should also prioritize this — you should have roughly three to six months’ post-tax income saved, and that is a bare minimum. If someone bequeaths you a sizable financial gift that is much greater than your debt, you can still pay off a large portion of your debt (or all of it) and have money to use elsewhere.