What Would You Do With a Cash Windfall?

It's raining money. Well, not exactly. But it might feel that way when you come into money that you weren't expecting to get: Lottery winnings, an inheritance, a Christmas bonus, a tax refund. So what would you do if you got money that you weren't expecting to get?

I know many of us will say that we'd save it for a rainy day, invest it, or payoff debt. But, have you done that with any unexpected cash in the past? And if not, what makes you so sure that you'll do it this time?

I recently gave someone a savings bond that I had been holding on to for 20 years. It was a $50 bond, which means the giver paid $25 for it. He took it to the bank the same day and cashed it for $69. And within an hour, that $69 was gone. That got me to thinking. One, it would probably take him about two hours to spend the other bonds that I have for him. (I haven't given them to him to find out.) Two, how much would that $69 have been worth in 20 years if he had added $31 to it, and treated it the same way that I'd treated the bond for the same length of time? What if he had bought two $100 bonds and not touched them for 20 years?

With the government bond rates being .30%, he certainly wouldn't double his money. And the same can be said if he had invested the money in a Certificate of Deposit (CD). There's not much of a return on investment there either.

Here's the deal. When you're broke, and someone puts $69 in your hand, it looks like a lot of money. But when you look at it in terms of a long-term investment, and you see that you won't get much on your return, you think why bother? Well, here's why you should bother, you have to start somewhere. You have to see starting small as the beginning of something big, because you then start the habit of saving. And as you continue to invest small amounts regularly, you'll start to see them yield bigger results.

Feedback Friday Question: Imagine getting a cash windfall of $1,000, $10,000 or $100,000. What would you do with the money? Is any part of it worth investing?

1 comment:

Millionaire’s Consultant said...

Great article this is really helpful for those who are wishing to have a bigger income while staying at their house

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