Get Financially Fit!

Answer:
When people get unexpected money they tend to follow their money temperament. Spenders readily make a purchase and savers either pay down a loan or invest the money. If you get a large amount of unexpected money, consider enjoying 20%, consider giving a portion away to a good cause (i.e. contribution to your favorite charity, tithe, etc) , and then putting the rest to work.  If you are generally a spender, this strategy both feeds your urge to live life fully today and invest for tomorrow. If you are a saver, this strategy forces to enjoy life today and feeds your desire to build for the future.

Enjoying a portion of the money is not a problem for most people. The main question is, what should I do with the remaining? I have outlined 10 Financial Steps in the article titled Create a financial plan.  I recommend tht you follow the financial steps as a roadmap for putting the remaining money to work.

First make sure you have at least $1000 in your emergency fund [step2].  If your emergency fund is fully funded then pay off high interest (> 6%) debt such as credit cards [step 3].  Next apply money toward your retirement [step 4].  You can do this by starting a Roth or traditional IRA. If you still have remaining money then pay off remaining consumer debts [step 6].  The next use for money is to build up a 3 to 6 month rainy day fund [step 7]. If you haven’t maximized your retirement savings through your 401k/403b then this is a good investment [step 8].  The next use for your money is to pay off your mortgage [step 9].  If you still have remaining money then I recommend that you invest the money.  You can either go conservative with ibonds or aggressive with a mutual fund portfolio.

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