Mighty Bargain Hunter offers some advice on what to do with your next windfall—it doesn’t have to be a lot of money, just a little more than you planned for in your budget, leaving you happily able to pick and choose how to spend or invest it.
Their first three choices: pay down debt, add to your emergency fund, or use it to replace an appliance or other big-ticket item that’s outlived its usefulness. Another interesting option is to “invest in yourself” with books, software, or a class in something you’d like to learn, like a new language. Or karate.
The common sense solution, of course, is to pay off debt, especially high-interest credit card accounts. But CNN Money suggests a slightly different route: invest at least part if not all of it in your retirement savings.
Their argument goes like this: it’s much easier to spend than to save, and if you use your windfall to pay down your credit cards, there’s no guarantee you won’t spend them back up again. We can see this happening especially if you experience some sort of “saver’s remorse” and splurge on that luxury item you told yourself you wouldn’t buy with the windfall in the first place. Yes, we know it’s not rational, but not everyone can be as good with money as the Leprechaun Frog in this photo.