There’s a new money question up over at Lazy Man and Money. It’s a three part series (Part 1, Part 2, Part 3) that asks what some of us bloggers would do if $50,000 just happens to fall on our laps.
Here’s what I said:
For our particular case, I have two options that come to mind with regards to what I can do with an extra $50,000 or even $100,000. The first is to follow in the footsteps of Ben @ MoneySmartLife with a similar strategy: use the money to help continue financing the startup our family is trying to build at the moment. It would help us delay having to acquire any additional external investments that would dilute our ownership: self-financing would potentially allow us to reach a critical mass that could keep the business running on its own with positive cash flow. Of course, that’s a dream at this point, but that additional $50K would get us there!
Secondly, I could also consider using the windfall to fund my second child’s 529 account. Since my child is still very young, we would have almost 18 years before we would draw on this money. By virtue of a lump sum investment into a more aggressive area of the stock market, such as US small cap stocks or a combination of US small caps/emerging market exposure/foreign REITs, we may possibly fund his entire education on this one lump sum investment if the markets continue to be favorable.
To be honest, I can think of a lot more I can do with the bucks, such as earmark it for some home repairs for the next couple of years (invest in the house!) or simply and quietly include it in our given asset allocation mix for our longer term goal of retiring early. But those are lower down our list of priorities, as the kids and the business take our focus and first dibs at the funds at this point.
Your predicament can be quite different though — but in general, the best ways to treat a windfall are to:
- Use it to first get rid of your debt or eliminate credit card debt
- Create an emergency fund by squirreling your windfall into highly liquid savings accounts or in a high yield free checking account (yes those exist!)
- Fund longer term financial objectives like the goals to save for college or to save for retirement
- Invest in an index fund
- Pay down your mortgage or other “good” debt
What I would avoid doing? Buying an expensive big ticket item that depreciates in value very quickly 
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