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Spending A Sudden Windfall
By Daphne | April 4, 2008
What would you do if you suddenly received $100,000 tax free?
If you won or inherited a large sum of money (tax free) depending on how money savvy you are, you may make different choices for your money.
Let’s say you were given $1000 to do with what you pleased. Would you have different plans for that money than you would a larger sum?
Probably.
A smaller sum wouldn’t give you enough to retire on, but you could make a dent in any outstanding bills, give some away and also save or invest some.
It’s extra money so wouldn’t it be easier to spend it all. Sure but saving some for later would also be a prudent move.
I sometimes find myself spending Christmas cash months later because I wait until I really see something that I want to buy and get it. My mother calls me cheap, but my father praises my frugality.
The larger the sum of money would mean that I would have more to give away, more to save/invest and more to spend. Keeping this in mind and having this mind set when you don’t have the money will help you make rational decisions. If you are a saver by nature with or without a goal in mind, you will be in the right frame of mind to make better choices with your money.
Let’s say you have a dollar and decide that you will give away 10 cents, save 15 and then have the other 75 cents to spend. With a dollar that doesn’t seem to be a lot. If you have $100000, you would be giving away 10,000, saving/investing 15000 and then spending $75000. When the amount increases it doesn’t seem as great a windfall to be able to only spend $75,000.
Having set guidelines in your head when dealing with your own money works just as well. If you decide that you want to save/invest 15% of your income and give 10% away and then spend the rest you will have a better understanding of how to budget your money.
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Topics: April 2008 |
April 7th, 2008 at 6:06 pm
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