48. What to do with a Windfall

Welcome back to Spend Donate Invest. We vote, we protest, but what about our money? Is there a way we can line up our money with the kind of world we’d like to live in? This is what I’m exploring on this show.  Thank you so much for all of your emails and DMs with all of the questions you’re wondering about. 

Here’s this week’s letter:
I’m writing to ask what you think I should do with a windfall? I completely did not expect to be compensated for some work that I did to help out a friend. It’s not a life changing amount of money, but it’s enough to go on a nice vacation for example. A little context- my finances are in good shape. I have my emergency savings where I want them. I am maxing out all my retirement accounts. I comfortably pay my living expenses every month with enough to put into savings above and beyond my retirement savings. There’s nothing that I really want or need. So I’m asking what should I do with this windfall? I have never been this financially secure before so it is scary to think about just blowing it all on something extravagant or just giving it all away, but I’m just looking to find out if you have any suggestions on how to think about this cash.

Oh that’s exciting! Nothing better than surprise money right LOL. You know, the first thing that I was thinking of as I was reading your letter was taxes. LOL. So make sure if you are going to subject to taxes that you have held that aside. And then let’s, for the rest of this discussion, assume we are talking about the net windfall. A lot of advice that you’ll see is to put the windfall into an account and freeze it for some amount of time so you don’t make any rash decisions, but in your case, I dunno, given that you have never felt this financially secure before, you might be tempted to just save this money forever and not really explore other options. It might feel more like you’re losing money to have to withdraw from that account if it sits there for months and months. So, a couple of suggestions came to mind. The first is you might want to sit down with a fee based financial planner to get a sense of your financial stability. I am not a financial planner, just someone who studies it as a personal interest and while what you’re saying about your emergency savings and retirement accounts sounds good at a high level, you might benefit from sitting down with someone who can get into your age and how long it may be until you retire and therefore if you’re on track with your retirement savings and investments to get you there. They can dig into your emergency expenses to help you understand if you are solid enough there. And what I like about the fee based financial planners is that they are not going to be as pressed to push you towards making decisions that they earn a commission on. So you could use some of your money to do that. Have that conversation and get a financial check up and then decide what to do with the rest of your windfall after that discussion.

But let’s say you’ve already done that, you know for sure that you’re all set. This windfall really is just gravy on top. In that case, here’s the rule of thirds I like. Spend a third, save a third, give a third away. A year or two ago I was fortunate enough to receive a little bit of unexpected money. And that’s exactly what I did. I immediately took off the tax portion and put that into an account so there weren’t surprises during tax season. Then for the remaining money I spent a third to go visit some loved ones in California and go on a black women’s hiking trip in Yosemite. And then I saved a third- I put it into my long term savings for a big goal that I am working towards. And I gave the other third to secure menstrual supplies for a group of immigrant women. And it felt absolutely amazing. A little bit responsible, a little bit communal, a little bit lavish.What does Megan say? Classy, bougie, ratchet? Same thing here. Responsible, communal, lavish….

LOL Alright well that’s all for this week. Thanks for joining for today’s discussion. Welcome to all the new listeners that have come around these last few weeks. If you ever have a topic you’d like to hear on the show, feel free to send a note to spend donate invest at gmail dot com. You can catch up on old episodes, there are a lot at this point, by going to the website spend donate invest dot world. There’s a monthlyish newsletter that goes out with links and extras. You can sign up for that by emailing the show, again that’s spend donate invest at gmail dot com. Or you can sign up at the website. If you want to support the show, please share an episode with someone who isn’t already listening. There’s also a buy me a coffee link you can click on. It’s like patreon, it’s a way to support the show. For example, you can kick in to contribute towards all the behind the scenes expenses of running the show- hosting, audio editing, gear, etcetera. Thanks so much for coming around this week and let’s talk soon!