If you’ve recently come into a substantial amount of money, it can be overwhelming to know what to do with your windfall. While you likely want to be responsible with your money, a part of you may also want to use it for things you otherwise may not be able to afford. Before you do anything with your money, here are some tips to help you maximize your windfall.
While it can be tempting to run out and purchase a new car or take an expensive vacation, the smart thing to do right after receiving a financial windfall is to do nothing while you wait out temptation and develop a plan. When you speak with a financial advisor Franklin Lakes NJ, they are likely going to advise you not to do anything foolhardy before you’ve developed a plan for your money.
Set Some Aside
Before you begin spending your money, calculate what you will owe in taxes. Chances are you’ll likely be required to pay capital gains, state, or federal income taxes on your windfall unless it was received as part of a death benefit. Talk with a tax advisor to determine what, if any, taxes you’ll owe on your windfall to avoid surprises come tax time. Once you’ve determined what you owe in taxes, you can begin to pay off any debt you have, such as student loan debt, credit card debt, or your mortgage.
Save for the Future
If you have any money left after your debts have been paid, you can begin to setup a nest egg for your future in the form of a 401k or emergency fund. Check with a tax advisor to see what the current maximum allowable amount is to fund a 401k and max out your contribution. Depending on your age, you may even be able to make catch up contributions as well.