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What to Do with a Sudden Large Sum of Money

January 10, 2022 By MelissaB Leave a Comment

For years, my aunt and uncle helped their aging relative, Dottie. They didn’t receive any financial assistance for the five to ten hours a week they spent maintaining Dottie’s lawn, cooking her meals, and driving her to doctor’s appointments. They put in that time, week after week, because they loved her and wanted to make the remainder of her life more comfortable. However, my aunt and uncle were in for a surprise when Dottie passed away. They discovered not only that Dottie had a small fortune, but that she had left all of her money to them. My aunt and uncle raised a large family and had always lived on a bare-bones budget, yet suddenly, they had inherited a sudden large sum of money.

My aunt and uncle’s situation was not unique. Many people fall into a large sum of money through inheritances, insurance settlements, gambling, or other ways. If this happens to you, what should you do with the money?

Do Nothing for a Few Months

The best thing to do is nothing. Yes, you heard me. Take the money you received, put it in a bank account, and do nothing with it for a few months to a year. Take time to get over the shock of your good fortune. Take time to plan out how best to use the money.

If you don’t take the time to let the money sit, you may blow it on all of the things you’ve always wanted but could never afford—a new boat, a vacation home in the mountains, nights out at fancy restaurants, etc. Take the time to get used to having so much money before you do anything with it.

Consult with a Financial Advisor

You may also want to consult a financial advisor and see what she recommends you do with the money. However, choose carefully. Some financial advisors are paid based on the products that they sell you, so they may push products that aren’t the best use of your money so they can also benefit from your windfall.

What to Do with a Sudden Large Sum of Money

After you’ve taken a few months to set the money aside and get used to the idea of having a fatter bottom line, you are ready to decide what to do with the money.

Set Aside a Portion to Spend

If you receive a large amount of money, the first thing most people want to do is spend it. Go ahead and spend some of it, but first, decide what amount you will use frivolously. Maybe you decide on 5% of the money.

Take that 5% and have no guilt buying what you want. Whether that is expensive meals out, or a vacation, or a new car, enjoy the money guilt-free. But, stop spending after that and make wise choices with the remaining funds.

Pay Down Debt

One of the best ways to use a sudden large sum of money is to pay down or pay off your debt. After you pay off debt, you can start with a clean financial slate. Then the money you make every month will be used for the present and the future, not servicing money you spent in the past.

Create an Emergency Fund

How’s much is in your emergency fund? If you have nothing saved or only a thousand dollars or two, use your windfall to bulk up your emergency fund. Experts recommend saving six to 12 months of expenses in an emergency fund. If you have a steady, reliable job, go for the lesser amount. If you’re a freelancer or have a job that may get cut when the economy stalls, save enough for 12 months.

Invest

After you pay down your debts and bulking up your emergency fund, consider investing. This is one of the best uses of the windfall because you’ll continue to earn money through investing, making your windfall grow.

Contribute to Your Retirement

Getting a sudden large sum of money can make your financial future brighter when you contribute to your retirement accounts. However, the government limits how much you contribute to your retirement each year. Depending on how much money you receive, you may not be able to use it all by contributing to your retirement, or you will have to space your contributions over several years.

Buy a House

If you don’t own a home, now might be the time to buy one. However, even though you have a sudden large sum of money, don’t buy your house based on that money. Instead, buy a house that you would have been able to afford before you received the money. This assures that you won’t spend more than you earn. Use your newfound money to put down a hefty down payment.

By choosing a house you can afford based on your salary, you’ll be able to keep and maintain monthly payments on the house even if you lose the money you just inherited. (Sadly, many people who receive large windfalls end up broke a few years after.)

Contribute to Your Children’s College Funds

Another option is to contribute to your children’s college funds. When it’s time for your child to go to college, the money will be there waiting. You can contribute to a 529, or if you want to save money for your child without earmarking it for college, you can contribute to a Uniform Gift to Minors Act (UGMA).

Final Thoughts

When you come into a sudden large amount of money, you have many decisions to make. Take a few months to a year and do nothing. Wait for the shock to subside. Then, choose from one to several of the above options when deciding what to do with the money. Choose the options that will best serve you and your family. And don’t forget to earmark a small percentage of the money to spend and enjoy.

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3 Questions to Answer Before you Start a Business

December 31, 2021 By Justin Weinger Leave a Comment

The idea of starting your own business can be very exciting. It’s an opportunity to be your own boss, pursue things you’re genuinely interested in, and even make a positive impact on the world. However, it’s important to remember that even if you’re perfectly suited to be a successful entrepreneur, you might not be in the right moment of your life to launch your company. Starting a business isn’t something you should do lightly, or without extensive planning. It’s important to sit down and consider all of the potential challenges you’re going to face on the road to success, and how you’re going to overcome them. There are so many things that need to be considered, from whether you will need to hire a virtual assistant for healthcare businesses if you’re going down that route, to what sort of products you will make if you are thinking of entering the manufacturing sector. To help with this, here are some questions you can ask yourself to determine if you’re ready to start a business.

Is My Idea Bulletproof?

A good idea is an important part of launching any successful business. Although you might think your concept for a company is the best thing you’ve ever heard of, it’s best to do some extra research to ensure the idea is feasible. Look at the competition in your area, and how many potential customers you’re likely to have for your company. It’s also worth writing a comprehensive business plan, where you can outline exactly how much money you need to earn each day, week, and month to break even on your company’s concept. Once you know your idea is bulletproof, you’ll be more ready to invest.

Do I Have the Cash?

Obviously, most people thinking of launching a small business won’t have the money for an entire company just sitting in their back pocket. However, you should at least have an idea of where you’re going to find the crucial funding you need. For instance, you might consider a business loan, if you have the credit to do so.

Another option is to look into the assets you can leverage in your own life. For instance, you can significantly reduce your monthly expenses with some budget balancing, and use the money you save towards your business. Look at your current budget and try to find opportunities for savings. You can refinance student loans to save money on extra expensive fees and interest rates. Consolidating existing loans into a new loan with a private lender can save some serious cash.

Do I Have the Mindset?

Finally, consider whether you have the right mindset and attitude to become a successful business owner. Although most people assume they’re prepared for a life as an entrepreneur, it can be more challenging than you’d think. You’ll need to deal with a lot of stress, some serious ups and downs which can leave you worrying about your company, relationships and cash. If you’re not prepared to deal with the complexity of having your own business, and the headaches which come with it, it might not be the right time for you to take this route. You will need to juggle a lot, like how to improve the employee experience, how to optimize your website for growth, and how to handle potential outsourcing, just to name a few things. Remember, it always helps to have some support from loved ones around you to make the experience a little less painful.

6 Items You Should Never Pay Full Price For

December 6, 2021 By MelissaB Leave a Comment

When I graduated from college and came back to live at home for a few years, I went with my mom to the furniture store to buy a bed, dresser, and desk set. We found one that I loved. However, I was embarrassed when my mom started haggling with the salesperson. She haggled for about 10 minutes, and in the end, she got 15% off the set. Turns out my mom knew something I, as a young person in my 20s, didn’t—there are certain items you should never pay full price for.

New Furniture

As per my experience, you should never pay full price for furniture. To save money on furniture, use these tactics:

Shop in Winter or the End of Summer

Furniture stores get their inventory in the spring and fall, so they will be looking to get rid of older pieces and be more willing to negotiate. (I bought my furniture in January.)

Go to Smaller Furniture Stores

You won’t be able to negotiate at a big store like Ikea. However, if you visit a small, local furniture store or chain, the salesperson will likely negotiate with you.

Shop Clearance Items

Most furniture stores have a clearance section. They want to get rid of those items, so you may have even more negotiating power if you shop clearance.

Buy Used Furniture

Of course, buying new furniture isn’t the only way to go. You can save much more if you’re open to buying used furniture. For instance, I was driving through a neighborhood one day when I saw a dining room table as part of a garage sale. That table was only $50 and included the table, leaves, and four chairs. It has lasted us for 10 years, though we’re due to replace it sometime soon.

In addition to garage sales, you can find good used furniture advertised on Craigslist and at second-hand shops. You’ll pay only a fraction of the new price.

Hotel Rooms

You can save on hotel rooms in a variety of ways.

Use Online Tools

Many online tools can help you pay less for a hotel room. Consider using Kayak, Expedia, or Priceline.

Use Your Membership

Do you belong to AARP, AAA, or the military? If so, mention that when you check in, and you will likely get a discount.

Avoid Hotel Rooms

Another option is to bypass hotel rooms altogether. You may find that vacation rentals are cheaper than hotel rooms, especially if you have a large family.

Rental Cars

Rental cars are a necessity, but the price can add up quickly, especially when you add optional insurance coverage. Luckily, you can use these strategies to save.

Book in Advance

The earlier you can reserve your rental car, the less you’ll pay. Our family had to rent a minivan for a trip, and we booked three months in advance. As the day got closer to our day to pick up the van, I was astonished to see how much the price went up. We easily saved 20% by booking in advance. Most reservations are non-binding, so booking in advance is a low-risk proposition.

Use Your Costco Membership

If you have a Costco membership, use their travel tab online and make your reservation through Costco’s website. You’ll pay the least amount of money with your Costco card. That’s the only way we book rental cars now.

Don’t Rent at the Airport

Most people get off the plane and go right to the airport rental car desk. Sure, doing so is convenient, but you’re paying extra for that perk. You’ll likely save more if you take an Uber or Lyft to a rental car location a few miles from the airport.

Use Your Credit Card for Insurance

One of the costly fees when renting a car is to pay for the daily insurance. Before you rent the car, call your credit card company and see if they offer primary insurance on rental cars when you use their card to pay for the rental. If so, you could save a bundle by opting out of insurance.

Vehicles

In the market for a new car? Get ready to haggle because you don’t want to pay full price for a vehicle. The car will likely be listed with the MSRP (Manufacturer’s Retail Sales Price). However, to negotiate successfully, you’ll also need to know roughly how much the dealer paid for the vehicle. Then, you’re ready to negotiate. Consumer Reports has an excellent tutorial on how to negotiate with a car dealership.

One caveat: the used and new car markets are strained due to the pandemic, so we’re in a seller’s market. You may not be able to negotiate as successfully as if there wasn’t a supply chain shortage and an increase in demand.

School Supplies

Items You Should Never Pay Full Price For — Photo by Kelly Sikkema on Unsplash

Our family never pays full price for school supplies. Instead, we buy an excess of school supplies in July and August when they’re dirt cheap. Then, when we need glue, or scissors, or paper, or a notebook some other time in the year, we just reach into our stockpile. By shopping like this, you can easily get school supplies for 90% off the retail price.

Mattresses

Look to buy a mattress during the major holidays and Black Friday. They will often be offered for 10 to 20% off. Also, just like furniture, you can save a bundle if you buy right as the new season’s mattresses arrive. That means if you buy last season’s model in April, you should save a significant percentage because the store wants to make room for the new models. You can also try to negotiate with the salesperson to save a bit more.

Final Thoughts

If you’re in the market for these items you should never pay full price for, I hope you can use these tactics to save money. Many of these items are big-ticket items, so the more you can save, the better.

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