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April 16, 2011


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Great article, great advice. I recently had unexpectedly come into a nice sum of money. A family member talked me into putting it all minus 2% into a 6 month cd. The reason for this was simple. It was not to make me money but to protect me from the instant euphoria a person gets when something like this happens. I spent my 2% rather quickly as I'm sure you guessed, but after everything settled down, I was now in a position to clearly think it all out. I'm very thankful for this advice and I am now living pretty comfortably.

35% of lottery winners of more than one million dollars file bankruptcy within 10 years of winning. You post offers excellent advice.

Tithe 10%, Spend 10%, Invest the rest. Spending 10% should be after 6 months of waiting to resist fevered purchases.

Pretty good argument from Marotta.

Should also consider the impact of taxes. Many windfalls come with large tax bills that people don't really figure before they go and spend a large % of the money.

interesting perspective on unexpected wealth. the premise appears globally applicable (even to wage income), and that is to spend a small portion and save a larger one!

Love Mike's suggestion about the 6 month CD.

In the past two years, my husband and I have become this disciplined with windfalls, which include anything from a $20 birthday present to a $30,000 stock grant. In the past two years, we've paid off $138,000 in debt, while maxing out his 401k and contributing to our children's college funds. People ask us all the time how we've done it and I tell them that it was all about changing how we treated "found money." One hundred percent of our windfalls go to financial goals, while splurges come out of the monthly budget. If we can't afford it out of the monthly budget, a windfall doesn't change that.

The key is to have the right attitude toward the windfall. If you spend it or give it away, make sure it's used to accomplish a specific, one-time goal with no recurring costs -- so it doesn't lead to lifestyle inflation. Paying off a mortgage, or helping with something like a food bank's construction expenses, would be reasonable. Buying an expensive car that will have expensive insurance payments wouldn't be as good of an idea.

What I do with unexpected money is to just save it and forget that I ever got it. I've shaped my hobbies around non materialistic items so this works out well for me. I too like the suggestion about the 6 month CD.

-Ravi Gupta

That's about right- we spent less than 2% of a windfall on a trip to the Maldives, and that was well worth it.

This is a great perspective. Each situation is different, but the overarching concept rings true for everyone: use windfalls to accomplish financial goals. Excellent piece.

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