If you have been fortunate enough to receive a cash windfall, you may be tempted to do something frivolous with your new riches, such as take an exotic vacation or splurge on new clothes. While these things are great, the fact is you will not be putting your money to excellent use by choosing these options. If you want to make the most of your cash windfall, here are some possibilities you should be discussing with your CPA.
Start Your Own Business
If you have always wanted to be your own boss, coming into some cash may now make your dream a reality. Whether it is only a few thousand dollars or much more, you may now be able to follow your desire to become a successful entrepreneur. Should you want to pursue this path, consult with your CPA to learn about taxes and other areas of finance you'll need to know before starting your business.
Pay Off Debt
While it doesn't sound like the most fun thing you could do with your cash windfall, you and your CPA will probably agree that paying off credit card and perhaps student loan debt will help improve your financial picture in a big way over the months and years ahead. If you do this, the frown you have on your face now will turn into a smile when you realize you now either have very little debt or are in fact debt-free.
Buy a Home
Rather than continue to pay rent to your landlord month after month, you may want to take your windfall and become a homeowner. Even though interest rates have gone up in recent months, there are still plenty of people who are eager to sell their homes. By having a large amount of money you can use as your down payment, this will make you a very attractive buyer to lots of sellers. By working closely with your CPA and a real estate agent, you can be in the driver's seat to get your dream home at a very affordable price.
Open a Retirement Account
Even if you are still decades away from retirement, taking your cash windfall and opening a retirement account will bring you plenty of peace of mind as the years go by. You may want to open a Roth IRA, which could help you keep much of your money tax-free. Should you work for an employer who offers you a 401(k) account, consider putting most if not all of your windfall into this account. If your employer is one who matches your contribution, this will be even better.
Buy a New Car
If you have been spending money right and left on car repairs because you haven't had the money needed to buy a new vehicle, your problem may have been solved thanks to your cash windfall. Even though a new vehicle will begin to depreciate the minute you drive it off the dealer's lot, you can still come out way ahead by not having to pay for one expensive repair after another on a regular basis. Should you decide to do this, talk to your CPA about how to get the best financing and how a car payment, insurance, and other costs may impact your budget.
Open a 529 Plan
If you are a parent of a small child, you probably worry about having enough money available to pay for your child's college education. Rather than stay awake at night worrying about this problem, take your cash windfall and open a 529 Plan. Once you talk this over with your CPA, you will discover you will not only earn interest on this money, but that it will also be tax-deferred.
Purchase Life Insurance
Should you be the primary breadwinner for your family, taking some or all of your cash windfall to purchase life insurance will be a wonderful way to give you and your family tremendous peace of mind. Even if you are older, there are many life insurance options available to meet your needs. Before deciding on a policy and paying any premiums, let your CPA look over the policy's fine print.
Start an Emergency Fund
Unfortunately, the vast majority of people have little if any money set aside for emergencies, such as losing a job, a car or home repair, or a medical emergency. Now that you have your cash windfall, this may be the perfect time to start your emergency fund. When you speak to your CPA about this, you will probably be told to have an amount in your emergency fund that is equal to about six months' worth of expenses. Even if your windfall is not for that full amount, putting aside as much as you can will be a smart decision.
Fix Up Your Home
Since your home is likely the biggest investment you will make in your lifetime, take advantage of your sudden wealth and use the money for some much-needed home repairs. This can be a new roof, an updated electrical system, buying some new appliances, or perhaps remodeling your kitchen or bathroom. By doing so, you will add to the value of your home, which can benefit you should you decide to sell at some point down the road.
Donate to Charity
If there is a cause that is near and dear to your heart, you can take your cash windfall and make a charitable donation. Along with the money being much-appreciated by whatever organization you support, you may be able to write off the donation come tax time. However, to do this, the charity will need to be a qualifying organization. Therefore, talk to your CPA about this before you try doing something for a good cause.
Since you have so many options regarding what to do with your cash windfall, do all you can to make a smart decision. By talking over various ideas you have with your CPA, you'll put your cash windfall to excellent use.