Gather Little by Little

Hank from My Investing Blog is running a great contest where the winner will receive $300.00 in American Express Gift cards. The question you have to answer to enter is: If you were given $50,000USD (tax free) today, what would you spend it on?

Handling a financial windfall

If I were handed a $50,000 check today I must admit the temptation to go out and purchase a BMW 135i would be so tempting! But I wouldn’t, but this does remind me of a very important point: When and if you receive a financial windfall, regardless of the amount, don’t let temptation win.

Financial windfalls like this are a really great opportunity to make a big impact on your current financial situation. Here are just a few things for you to consider:

• Have debt? More than likely, a $50,000 windfall will payoff all of your debt except for your mortgage. Just imagine how much more money you would have each month with no monthly payments.
• Have enough savings for 3-months of living expenses? What would you do if you were laid-off or suddenly became unemployed? Would you have enough to to keep the lights on until you found another job? How sure are you of that answer? Wouldn’t you feel far safer knowing that you had 3-months (or more) worth of expenses sitting in a savings account to live on?
• Have a mortgage? Run a quick calculation and note how much more quickly your mortgage would be paid off by applying a $50,000 payment against it. For me, it would be huge! Just think, that’s $50,000 extra in equity you would have available as well.
• No debt and no mortgage? $50,000 invested in mutual funds, assuming a conservative 8% return for 25 years would yield $342,424!! Wow, that would really shore up the old retirement fund.
• How about giving to charity or helping out a friend? So you are in great financial shape. No debt, mortgage is paid for, you have an emergency fund and your investments are doing well. How about considering giving your money to a charity? In countries around the world, $50,000 dollars would make a huge difference is somebodies life. Personally, some really good friends are in a desperate financial situation right now.

These are just a few of the ideas I came up with. I’m sure there are many others. $50,000 dollars is a large amount of money so you should be very intentional and deliberate with how you spend it. Don’t get caught in a situation where the money is burning a hole in your pocket and you waste it on a bunch of stuff you really don’t need.

What would I do?

I believe that we should take care of our own financial situations first and then help others the best we can:

1 Timothy 5:8 – If anyone does not provide for his relatives, and especially for his immediate family, he has denied the faith and is worse than an unbeliever.

With that in mind, I would first give 10% to our church. The remaining amount would be applied to our debt. It would payoff our credit cards and our remaining car loan. The remainder would go into our emergency fund so we would have 3+ months of living expenses.

What would you do with a $50,000 windfall? Head over to Hank’s contest and add a comment sharing what you would do.

Photo by: Tracy O