A Guide To Making The Most Of A Lump Sum
For the most part, maintaining the health of your finances is about focusing on your daily financial needs – ensuring that you have enough set aside to cover your bills, that your budget is managed, and that you are always getting the best deal on financial products.
However, there is one scenario in which you may need to go beyond financial management methods: receiving a lump sum of money. This lump sum could be in the form of an inheritance, a payout from a personal injury claim conducted by the likes of DiPiero Simmons McGinley & Bastress, PLLC, or a refund from a company or government agency – whatever the source, you will want to make the most of the funds. Below, we’ve compiled a few tips that can help you manage a lump sum effectively, starting with…
1. Pay Off Your Debts
Admittedly, few people daydream about receiving a lump sum of money and using it to pay off debt – it’s definitely not the most exciting idea. However, paying off debts is a great way to make use of some or all of your lump sum funds, and could help to ensure you are able to enjoy a brighter financial outlook in
2. Start Investing
Investments can be a great way of securing your finances and earning a return on your lump sum, so this idea is well worth considering. However, the world of investing is hugely complex for those entering for the first time – so if you are tempted to explore this route, then working with a reputable financial advisor is strongly advised.
3. Reduce Your Monthly Outgoings
To enjoy long-term benefits from your lump sum, consider using the funds to make upfront payments for the things you usually pay monthly for – such as your car insurance, cable subscription, broadband, and so on and so forth. For companies that do not accept upfront payments, you can set aside a year’s worth of payments in a separate account, from which a direct debit can be deducted every month.
4. Create An Emergency Fund
An emergency fund or rainy day fund is designed to be used only when needed, to cover unexpected expenses that have a tendency to crop up throughout life. To establish your own fund, it’s usually best to use a dedicated savings account – though do ensure it is an instant access account, rather than one that locks your funds away for a set period of time.
5. Essential Upgrades
Many household appliances and tech gadgets tend to need to be updated every few years, which can place an unnecessary strain on your budget. It’s therefore worth assessing the items you own and replacing anything that you expect may need to be replaced in the next six to 12 months. Not only does this ensure all of the equipment you rely on will be in great condition
The specifics of how you deal with a lump sum of money depends on your personal preferences, but hopefully, the ideas above will prove to be a solid starting point for further research in the future.
[a contributed post]