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How to Budget for Unexpected Windfalls
Unexpected windfalls are sources of joy for you and your dear ones. Like it is important to budget for emergencies, you need to be prepared for windfalls, too. It could be a major cash gift, a tax refund or hitting the lottery that made you fortunate. Whatever it is, it is wise to have a plan about how to use the money.
When you get access to a lot of money unexpectedly, remember that it is a chance to undo the mistakes you have done in the past. So, take a look at these tips and manage the money smartly.
Here then are the top tips to budget for an unexpected windfall:
Pay Tax Dues
Sudden windfalls are usually followed by the need to pay a definite amount of tax at the end of the year. If you spend all the money forgetting this, you will end up in debt when the time comes for the tax payment. You may consult a tax professional and seek his advice on things related to tax. Always set aside enough money for tax payment in the future.
Repay the Debts
Repaying the loans ensures the greatest returns possible. You can pay off the money you have used from the credit cards and the amount you have borrowed from someone if any. This will relieve the stress you have been feeling since you took the loan. It is a wonderful feeling to feel the freedom of not having to repay any debt anymore.
Repair Your Life
Now that you have done the two most important things, you can start repairing the broken things in your life. You may start with a health checkup of the whole family. Visit a dentist if required. You can fix that broken furniture or paint the house which you have been procrastinating due to lack of fund. This is the best time to do all the things which you kept putting off earlier.
Keep Some for Spending
You are a human being and you cannot always be practical and save all the money you can. When you receive a windfall, it is perfectly fine to spend some money on yourselves and your family. You could keep aside 5 percent of the total money for fulfilling your wishes. You could buy long craved items for your home or go for a holiday that you could afford now. But, remember to not over spend.
Save the Rest of the Money
After you have spent money on the immediate requirements, you may deposit the rest in a new savings account. This should be separate from your other bank accounts. Make this account difficult to access by not requesting for an ATM card or net banking services. This way, the money will be safe in this account. Even if you feel like spending it, it would be difficult for you to do so.
You cannot expect the money to fulfill all your desires. Resist the temptation to spend it all and live like you were living before. You could make a wish list of what you would like to buy with the money. And when the right time comes, you can buy them by availing discount offers. This is a great way to save money.
It is always a good idea to invest the money you got for your growth. The future is before you and you may want to make it lively by saving enough. You can hire an investment professional to know about the right kind of investments that yield more money in the future. Ultimately, this gives a feeling of joy.