You unexpectedly come into a significant chunk of money. I leave the definition of “significant” to you - what’s significant to me as a retiree with virtually no debt likely differs if you have 3 kids in college and a car that just died.
With that ground rule, what is your first thought concerning your windfall?
1 - I can finally get rid of my debt!
2 - I can finally build up my savings!
3 - I can finally get that < expensive item you’ve been lusting for >!
4 - I can finally take that dream vacation!
5 - I can finally help out < person or charity of your choice>!
6 - Something else.
For most of my life, #1 and #2 would have won. At this point, it’s probably #4, with a bit to #5. And maybe some #2, because old habits are hard to break.
Least likely is #3, even tho my car has over 210K miles and it would be nice to have something new and comfy with all the bells and whistles - but since I’ve retired, I don’t drive all that much anyway. Plus it’s just a car (yeah, I hear the collective gasp from you car people…) Honestly, there’s no item that I really want. But I admit with a big enough chunk of change, I’d do a major remodel/addition to my house. Maybe.
Likely 1 & 2. We don’t carry much debt beyond the mortgage and car payment but it’d be nicer to have none. Then save/invest whatever’s left for the time being. Depending on the amount, I might shave some off for an indulgence purchase but it’s unlikely that I’ll get $10k and buy a $9k entertainment system.
This is a bit different from your thread title about “Found money”. Found can be a purse you found with a significant amount of money and some ID with it. In that case I would choose option 6 and return it to its owner. I actually did this with a purse containing over $4000 cash and some cards.
I did recieve a $5000 inheritance from my aunt when she passed that I wasn’t expecting, so I did option 4 and took a bucket list vaction. Since she was a world traveler I thought it only proper to use it on a trip to Yellowstone with my niece and girlfriend.
I’m doing well for myself, so I would use it for a vacation first class. I’m talking round trip first class, a cruise with a room on the upper level that has a mini-deck, and a do-everything-at-every-stop agenda. I’d blow it all. I know this because that’s what I did 12 years ago when I made an extra 8 thousand dollars in 2 months during the summer when as a teacher I was on vacation.
#4. We are well set, have no debt whatsoever, and there’s nothing expensive I have any interest in consuming. I have a couple imagined unfunded community projects I’d love to spend a million dollars on, but I would settle for just giving to local deserving groups.
Maybe “free money” or “sudden windfall” would have been a better choice of words. Because if I truly found more than a couple of stray dollars on the ground, I’d be heading straight to the sheriff’s office to turn it in. These days the most I find is a quarter in an Aldi cart that someone failed to take with them.
#1 Pay off any debt #2 Make necessary large purchases - car, new fridge, new roof, etc. #3 Waste some - doesn’t matter how much or on what, it is a sacrifice to the money gods #4 Save the rest
Same. On a recent trip, while settling into our hotel room, we found a wallet in a drawer with several hundred euros. We didn’t trust the overnight staff at the front desk, so we poked through the wallet to find identifying details, and after a bit of online research to ensure we had the right person, we messaged the owner through several channels that we had her stuff. She came back a few hours later and gratefully collected it. No doubt it was inconvenient to her holiday plans to interrupt her travels and backtrack, but losing that much cash (and her ID cards) would be way more disruptive.
Re the “free money” question in the OP, I’ma say 6, other. Most of it goes to the retirement investment account (which we see as distinct from “savings,” which is just set aside). Depending on how much it is, the rest probably goes to some large purchase we’ve been postponing for budget reasons (e.g. we want to replace our 15-year-old bed and don’t want to cheap out).
This just happened to me. I’m on Social Security and have a significant, but not huge, portfolio for emergency use. I have virtually every bill I can debited directly from my bank account or my main credit card (streaming service, storage unit rental, and places that don’t do debit cards or direct bank debits). My bank account is a checking account with overdraft protection. If I debit my account, for example, for $400 more than I have, $400 will be transferred from my overdraft protection. I can pay that back as a lump sum or let it be recovered with a small automatic transfer every month. (This would take a year or two.)
I unexpectedly received a four figure sum last month. (1) Paid off my $400 overdraft on my checking account. Could have done that previously, since I had much more in checking, but I was lazy. (2) Paid off my storage unit for the next two months. (3) Paid both of my credit cards down to zero, even though they weren’t due for a few weeks. (4) Put new tires on my car. (5) Gave my wife $500 for her to use as she sees fit. (6) Bought myself a new set of good headphones.
Hey, we just found out this is happening to us! Not the lottery, unfortunately, but the business accountant just informed us we’ll be getting a hefty tax refund from last year. The return hasn’t even been filed yet, but we already allocated the money: since our debt outside the mortgage is already paid, we’ll chuck about a third of it into the rainy-day fund, put another third in the vacation fund, and we’ve already offered to help one daughter with the roof she just found out will cost between $20 and $28K to replace.
Quit my job. I’d like to think I’d do it with a bit of fanfare, but realistically that’s not my style, and I’d still give two weeks’ notice.
Move my parents into a bungalow (my dad has a horrible time on stairs but they won’t move out of their house) and arrange for in-home care.
I don’t dream of a big mansion, nor of a fancy condo in the sky. A moderate house with no mortgage hanging over my head. If my folks have passed, and I can finagle the legalities, I’d try to move to Cardiff, and take uni classes in anything I feel like, for as long as they interest me.
Assuming we’re not talking permanently life-changing amounts of money …
I’m newly retired and should be financially set for life. One can always get unlucky or develop very expensive very stupid habits though, so the possibility of relative penury is always out there.
Have no debt (#1) and don’t really need to save (#2).
Not really lusting after 3 or 4; those are well-handled already. I know I’m lazy enough that buying new toys for new hobbies leads only to unused toys. I could / would try wading into some new waters to see what if anything sticks, but no cannonballing. A man has got to know his limitations.
I already do #5s on a personal individual basis, and scaled to their need, not my ability. So me suddenly having some more ability wouldn’t change that. There is no organization I’d donate to unless I was in charge of it to ensure the money isn’t wasted, frittered ineffectually, or diverted.
I’m not clever enough for #6.
So 2s the default if there’s nothing else going on.
When it comes finding cash-for me circumstances and context matters greatly.
If like you I found a purse with $4000 cash and ID cards I would turn it over to the police to return to the owner.
If instead a found a random small duffel bag that only had $4000 cash and what appeared to be a Ziploc bag full of illegal drugs–I would probably keep the cash for myself and dispose of the rest. I mean if I turned IT over to the police they would keep the money for themselves anyway(look up “asset forfeiture” laws).
And I would NOT tell anyone I found the money either --I would just slowly spend the $4000 over the course of the year.
Also assuming, like LSLGuy, that we’re talking about a nice chunk-'o-change but not 6+ figures, I’d go with:
1 - I can finally get rid of my debt!
2 - I can finally build up my savings!
4 - I can finally take that dream vacation!
Usually I’m debt-free, but I’ve been carrying a couple thousand on my credit card for a few months because it’s been a particularly expensive year. So the first order of business would be paying that off, then I’d put whatever’s left in savings – minus enough to take a nice trip somewhere next year.
#3 (I can finally get that < expensive item you’ve been lusting for > !) isn’t really a thing for me: if there’s something I want, I usually manage to get it (eventually). The exception would be whenever my car needs to be replaced, but it’s a 2020 with only 15K miles so hopefully that won’t be any time soon.
#5 (I can finally help out < person or charity of your choice> !) also isn’t a thing for me: I can’t think of any one person I’d help (I’d need lottery-level winnings so I could help several relatives equally), and for the past three years I’ve spent significant amounts of time volunteering. I also spend my own money on the volunteer stuff at times, plus I still make small donations to other causes. And, now that the FDA has repealed the prohibition that kept me from giving blood until a year ago, I’ve started doing that, too. These days I feel pretty good about my “positive impact on society” level.
