What To Do With An Unexpected Windfall
By Lis McNealey Davies, CDFA®
Owner, Financial Advisor
It’s fun to dream about winning the lottery but there are more common ways you may find yourself with bonus money you weren’t expecting. It could be due to a large raise at work, bonus payout, or even a new business venture that takes off. If this should happen to you, our team has put together some items to consider to help you smartly make use of your financial windfall.
Pay yourself by investing wisely
It’s completely natural and expected that you’ll want to spend some of your unexpected bonus cash. A good rule of thumb is to spend a small percentage (up to 10 percent) but invest the rest. Working with a financial professional, you can set up a variety of ways to immediately put the money to work for you. This will also remove the temptation to spend more once you’ve gone through your initial allotted “fun money.”
Weigh the tax advantages and disadvantages
Large sums of gift or bonus money can often come with large tax bills. It’s important to understand the tax implications and to set money aside to deal with those. By working with your CPA, you can pre-plan the tax implications so that you don’t have a surprise when filing taxes. Depending on the amount of money you receive, you may need to consider different options to help minimize your tax liability.
Revisit your budget
You may want to take the opportunity to revisit your budget and see if it makes sense to adjust it. This is also a good time to revisit your financial goals and evaluate if there is a way to use the money to help you reach your goals more effectively, even if that means you use your bonus to pay down debt owed so that you are reducing your expenses going forward.
Our team can help you review what’s important and ensure that you have a good understanding of your options should you be fortunate enough to find yourself in this situation. Please contact us if you need guidance.
Lis McNealey Davies is owner of The Arlington Group Investment Consulting. A true leader in the female focused financial advisory niche, Lis builds upon the group’s strong foundation and core offerings to drive growth and champion the group as an emerging advisory company in the divorce, widowed and life transition niches. As a previous divorcee and mom to three wonderful daughters, Lis understands firsthand the importance of financial confidence.
The use of the CDFA® designation does not permit Wells Fargo Advisors or its Financial Advisors to provide legal advice, nor is it meant to imply that the firm or its associates are acting as experts in this field. Wells Fargo Advisors Financial Network is not a tax or legal advisor. Be sure to consult with your own tax and legal advisors before taking any action that may have tax or legal consequences.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. The Arlington Group Investment Consulting, LLC is a separate entity from WFAFN.