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VOL. 129 | NO. 124 | Thursday, June 26, 2014

Dana and Ray Brandon

What to Do With a Windfall

By Ray and Dana Brandon

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Ray’s take: You’ve just received a pretty nice amount of cash. It could be a tax refund, a bonus or a surprise inheritance. What will you do with that extra money?

You may decide to pay down some debt or stash it away for an emergency. But somehow, that doesn’t feel like much fun.

How about all the frugality you’ve been exercising the last few years? By its very nature, a surprise windfall begs for a splurge.

Yes. It is a good idea to spend some of it on something for the sheer enjoyment factor. But first, let’s go back to “The Plan.”

You remember, the one you so painstakingly put together for short-term, mid-term and long-term goals. Look to see if you are on track with the goals you set. How’s that college fund coming along? Decide where a percentage of that extra money could be used to do the most good. Do you want to shorten your retirement timeline? Now may be your chance. Then agree to use the rest for something fun.

How about a contract in writing with your spouse agreeing on the percentage to be put into “The Plan” and a percentage to be used for pure enjoyment? Putting it in writing makes it easier to remember later.

It’s always a smart move to think of the future any time you have extra money, but being too restrictive can result in going overboard down the road.

Dana’s take: It's Always Something.

“Saturday Night Live” character Roseanne Roseannadanna used to have a signature line: "It's always something." And it’s usually not something good.

If you're lucky enough to receive an unexpected refund, windfall or bonus, set aside a portion of it for your emergency or "It's always something" fund. You could even call it a "bad luck fund."

This week, Ray and I were both told that it's time to replace all of our tires. That's the equivalent of a whole year's car maintenance expense in one week – times two.

Let's face it – “it is always something,” and the timing is usually not the best. After closing on a house, both air-conditioning units die. The tree man says a dead tree could fall on your house in the next storm and $5,000 will solve the problem. A well-stocked emergency fund could be just the good luck you need to handle life's surprises.

Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at raybrandon@brandonplanning.com.

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