What would you do with a sudden windfall?
It’s interesting to listen to people discuss sudden windfalls and what they decide to do with that money. A common amount of money people inherit or suddenly come into via lawsuit, insurance, etc, is $100k. I’m not sure why. It just seems to be a number that I’ve heard a lot.
Setting aside the emotional baggage that would come with the money, it’s an interesting exercise to see where your financial priorities are.
Upon my most recent conversation about a $100k inheritance, I started thinking about what I would do if I sudden came upon $100k. Not that $100k is whole lot of money anymore, certainly not enough to quit one’s job, but it is a nice chunk of change to get handed to you all at once, especially if it’s tax free. I asked my husband what he thought he would do with that kind of money. His response? “Buy a supercharger.” Haha. He’s funny, isn’t he?
Keep in mind that my responses are all based on my current money situation, which is no non-mortgage debt. If I had non-mortgage debt, you can bet that would be where my money would first and foremost go.
My initial, safe response would be to put it all towards our mortgage. That, however, probably wouldn’t be the wisest use of the money.
Well, let’s first tackle the frivolous/fun portion of the money. Yes, the hubby could buy his supercharger for his car. That’s $4500. Maybe I should just say 10% for fun, so that would leave $5500 in that section. That would be enough for a nice vacation with leftover cash which I’ll leave unallocated right now.
We probably should max out Roth IRAs for the year. To keep numbers simple, we’ll use 2008 caps which are $5k per person, so that accounts for another $10k of our windfall.
Now we’re down to $80k. I think $40k towards a wide variety of investments, $20k towards home improvements and $20k into a high-interest savings account temporarily to be evaluated later for investment opportunity or saving towards some other goal. Ok, maybe we’ll put some of the final $20k towards the step-daughter’s college fund. We’ll see how nice she is come 2010.
The tally sheet:
- $10k - frivolous/fun (supercharger for hubby, vacation and some left over for fun)
- $10k - Roth IRAs (max for 2008)
- $40k - variety of other investments, non-retirement
- $20k - home improvements
- $20k - high-interest savings account, some for step-daughter’s college
Grand total: $100k
Does anyone out there have any idea what they would do with $100k or want to share with us what they’ve done with $100k?
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