What would you do if tomorrow you received $100,000 with no strings attached? You may inherit a significant amount from a home refinance. American homeowners are discovering easy access to life changing cash sums. Would you jump on a plane to Europe, hide the cash under the bed or throw a lavish party? How you handle this new and unexpected wealth could set you up for life, depending on the decisions you make.
Many people will find themselves in this position sometime in their lives. It can be unfortunate that some, who don’t think it through, before they know it the money’s gone and they don’t know how they spent it. Others take their time and make the best decisions for themselves. The ideal way is to draw up a financial plan before you start dipping into the money.
There are lots of different options on what people choose to do with the extra cash.
- Pay off debt- Rising debt is the most considerable headache you can ever face, so clearing it out can help your life change in a considerable positive light.
- Invest – Although not the most exciting prospect, looking to invest the money is a great option. Real estate is a solid investment that many people will consider when they find themselves in this situation. Another alternative is to allocate the extra money in taxable investments because when you decide to draw the amount out for a large purchase or retirement, it will be tax-free.
- Splurge on holidays – By contrast, you could spend the 100k embarking on lavish trips overseas although you will be making magical memories, the money will run out fast. Hotels, airline tickets, restaurants, and tours all cost money, lots of money.
- Buy a sports car – Have you always imagined yourself driving down the freeway in a convertible? Well keeping the dream alive for a few more years while compounding the 100k for a while will buy you a nicer car in the future!
So, before you go bananas and buy yourself a Tesla, sit back and take a deep breath. This 100k could make a big difference in your life if you make the right decisions. Take your time making spending decisions and consider talking with a financial professional about all your options. Create a financial plan that best suits you.