Whether you have leftover money from your tax refund, or have just received an unexpected inheritance, you want to be thoughtful about how you put extra money to work for you. Here are a few suggestions for what to do with unexpected financial windfalls:
Create an emergency fund.
The Pew Charitable Trusts reports that 55% of households do not have enough liquid savings to replace a month’s worth of lost income. Unexpected expenses are almost certain to pop up, and they can be devastating if you are not prepared. So if you don’t have one already, make it a point to use your extra cash to start an emergency fund! Your goal should be 3 months of living expenses, or more if you want a bigger cushion, but start off by building up your fund to cover one month.
Get rid of high interest debt.
If you are behind on payments for secured debt, for example debt that is tied to your home or your car, get those under control first, then turn your attention to unsecured debt. Pay down credit cards, student loans and personal loans, and prioritize those with the highest interest rate.
Add to your retirement savings.
It may mean putting off that new TV or the gorgeous pair of shoes, but your future self will thank you.
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