What to Do with a Lot of Money

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The following is a guest post from The Happy Housewife:

While many of us only dream of ending up with an extra thousand dollars or more, for some it is a reality. It could be a tax return, inheritance, gift, or a bonus. No matter the source, this money can be a blessing or a curse if spent unwisely.

If you find yourself in this situation, congratulations. Now let’s get down to business.

Here are some things to consider:

Do you have an emergency fund?

If you don’t have any savings this money can fund your emergency fund. Dave Ramsey recommends starting with $1000 if you have consumer debt to pay off. This small savings will keep you from charging the next emergency when it occurs.

Do you have debt?

If you have some savings, use this extra money to pay down a credit card or car loan. Being able to throw a large chunk of money at your debt helps knock it out quicker. You will be surprised how quickly you can pay it off when you get a head start.

Do you have any looming projects or repairs?

One of the tough things about being broke is that it is hard to dig yourself out of the hole. When things are bad, little problems become big problems because you don’t have the money to fix them. The little car repair becomes an engine overhaul because you couldn’t afford the $50 part a few months ago. The leaky roof becomes a huge remodeling job because you couldn’t afford to patch it.

If you have any looming projects or things that need to be repaired, use this money to take care of it. Maintaining things around the house is almost always less expensive than waiting until they are really broken.

You can also use this money to invest in your home. If installing a new water heater or thermostat will end up saving you money over time, spend now and save more later.

Do you drive a beater?

My husband drives a $500 eighteen year-old car. It’s running great now, but eventually we’ll need to replace it. If you are driving an older vehicle, use this money to start a car fund. Add a little bit of money to it every month and when your old car takes its final drive you’ll be able to replace it without going into debt.

Do you have children?

College is expensive and if you are planning on helping your children with college tuition use this money to invest in a college savings account. Depending on your situation you’ll want to look into 529 plans, Coverdell Education Savings Accounts, or Uniform Transfers to Minors Act.

Are you over 40?

If you are over 40 years old and don’t have much saved for retirement, this money could jump start your IRA. I’m not counting on Social Security to be around when I retire, so saving for retirement is a top priority.

Do you have a mortgage?

A one time principle payment saves money on interest and shortens your loan. If you are upside down on your mortgage or behind on payments, this money can help you catch up and possibly allow you to ride out this real estate mess.

Do you need a vacation?

If you’ve been working hard at paying down debt and saving for years, it’s okay to take a little bit of the money and splurge! It could be a fancy dinner for the family or a night away from home. Don’t feel guilty about blowing a little bit of the money. Even in the earliest stages of Dave Ramsey’s debt snowball he recommends giving each person “blow money” every month to spend however they want. You don’t have to blow all the money, but spending a little on something fun is okay.

Give it away.

You might be in a position where you don’t need any extra money. Consider blessing another family or organization with this money. I can assure you, you will be blessed much more than the recipient of the gift.

What would YOU do with an extra thousand dollars?

— Toni is a military spouse and stay at (home)schooling mom to seven super kids. You can find her writing about all things domestic at TheHappyHousewife.com.

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  1. An extra $1000. Hmmm. I would finish all the unfinished projects around our house!! Well, until I ran out of money, that is. 🙂 Great article — thanks for sharing and for hosting. ~Lisa

  2. Timely tips since I wrote about making savings a bill to pay this week. I’d stick the $1K in our emergency fund since I suspect we’ll see more of our 10 year old appliances failing in the next few years. I would also set it aside for a new furnace since ours is well over 40 years old, originally being a coal-fired furnace.

  3. Love this, I usually send money towards debt. However, I do like to keep a list of things that may need to be replaced soon so that I can save for them. For example, our blender was on the fritz. I realized this a few months ago and was able to buy a new one before the old one kicked the bucket. By planing ahead I was able to save 20% off the price.

  4. Oooh. It’s fun to ponder what I’d do with $1,000. We’re debt free as of last month (HOORAY!) so I think we would probably fence in our backyard. We’ve talked about it, and with two young kids and a dog, it would be great.

  5. If I had an extra $1000, I would put it towards paying off my husband’s student loans… or the save-for-the-next-car fund.

    1. @Molly, We will be putting most of the money towards paying down our mortgage (our only debt). We are also using some to get the living room painted and my husband is taking my son on a trip for his 15th birthday. 🙂

  6. My husband is about to get an extra $2800 paycheck from some work he is doing right now. We are using it to pay cash for braces for our son, rather than doing the monthly payment with the ortho. Not very exciting, but worth it though.

    1. We got a discount for paying it all up front so we borrowed the money from ourselves. Pulled it from our emergency fund then paid it back just like we would have had we not paid it all. Worked like a charm!

  7. Every year with our income tax check we always plan a nice family outing. Next year, we are going to disney doing this. We will save all birthday, christmas money etc throughout the year and then in Feb. put toward it what we still owe.

  8. Thanks for this post. I recently came into a job, and will be getting an extra $1000, or more per month–so this will be a good guide when we redo our “budget” and figure out what to do with the extra. We need to do a lot of these things. We’re debt free, except our mortgage, but will both need different vehicles soon, and need a retirement fund, and probably college for the kids. Good ideas!

  9. We’ve done this dreaming before, except we each got $1,000,000. It’s a lot of fun, but of course it will never happen.

    Annie Kate

  10. We are debt-free except our mortgage, so we would probably either put it in our emergency fund, or buy new flooring for our family room. The low-grade carpet that we hoped would last 3 to 5 more years is pretty disgusting. It is the most-used room in the house, and I’d love to put hardwood or laminate floors in there!

  11. Great advice- thanks for sharing!

    We have some percentages already figured out just for ‘extra money’ no matter the amount. So when something turns up we don’t even have to think what to do with it because we already know 20% will go to savings, 20% to retirement etc.

  12. I really like Christina’s comment about having a set percentage of any extra funds that come. Last year’s goal was to pay off all debt other than our mortgage and this year’s goal is to have a full 6 month emergency fund. We are just over halfway there. So my husband and I are on track to give each other “Financial Peace” as a Christmas gift this year!

  13. Good tips on being frugal with money. Any extra chunk of mortgage payoff is always helpful in the long run.