I have $X, what should I do with it?

Deciding what to do with new money

As the average global population continues to age there will be greater instances of wealth transfer from the old to the young. Most people will come into a bonanza sooner or later. Maybe it’s $5,000, or maybe it’s $500,000. Whatever the amount happens to be, it’s essential to grasp the significance of this opportunity and not squander it. A dollar saved is worth more than a dollar earned because of income and payroll taxes.

There is no shortage of questions on the internet that has the renowned format, “I have $X amount of money. What should I do with it?” The following snippets are taken from Reddit.


First of all, congratulations for saving, earning, inheriting, winning, or however else you came into the money. 🙂 The simple answer to what you should always do with your new found fortune is this: Maximize the utility of that money based on your personal core values and financial situation.

But that might be easier said than done, so let’s elaborate. Maximizing utility means making the best use of that money and stretching the value of each dollar to its greatest potential. This is determined by your values and financial affairs, and to a degree, the current state of the economy. Values drive motivation and we’re all motivated by different things. Wanting to retire early requires a different set of values and financial strategy than becoming a home owner. Understanding your financial situation means knowing what money means to you.

The answer should always be clear. If we’re not sure what our values around money are or how to best use that money, then we should keep our windfall in a high-interest savings account for the moment while we do some introspection. We have to balance what we need right now with what we’re going to need in the future. For example, maybe we want to use a portion of the money to create a rainy-day fund to ensure against any immediate financial emergencies, and use the remaining amount to buy “passively managed” funds. We can split it 3 ways: 50% in an S&P 500 fund, 25% in an international equity index fund, and 25% in a bond fund. Vanguard offers some low-cost ETFs that are quite popular among beginning investors. I personally hold some VOO. But this is just one example. We all have different goals and requirements in different stages of our lives. We can use the savings prority chart to help determine what’s more important to us. And feel free to browse some financial related subreddits to see what other people have done in similar situations.

My Personal Thoughts

I like to think of a windfall not as money per se, but more as a perpetual generator of income. 😀 Money used up now is gone forever. But a money producing machine will last a lifetime. 😉 As I explained in a previous article, we can easily turn today’s savings into future incomes.

If I’m given a pile of money now, I’d use it to buy dividend aristocrats with an average yield of 4% or higher, which should continue to grow over time. For example, next month I’ll be receiving close to $5,000 in rental income from my farmland which doesn’t happen very often. I won’t have to think about what to do with this money because I’ll immediately put it in my investment account and buy more shares of dividend growth stocks that I already own. This will boost my annual dividend income by at least $200. Then I’ll have the pleasure of deciding how I want to spend the extra $200 I receive each year! 🙂

Whatever we decide to do with our stroke of financial luck has to be our own decision. It’s important to be patient and not rush our choices. A pile of money earning only 1% interest in a savings account while we take days, weeks, or possibly even months to do some research and personal development work may sound boring. But we have to understand what all our options are in order to make the right decision. It’s better than making the wrong decision and losing some of that money in investments we don’t understand or making purchases we’ll regret later. 😛

Random Useless Fact:





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Seraphine @ Gathering.com
09/30/2015 5:24 am

Investing that money into something smart is of course the best way to make that extra income continue to be profitable for you. But putting some of that money back into savings could help ensure that if a rainy day does come, you can rest a little easier.


09/30/2015 6:12 am

We are on the same wave. If you can’t decide what to do with the money, best to put it in a GIC while you decide what to do. The last thing is to spend it all.

If this were to happen to me where I get a large sum of money, I’d totally purchase more high quality dividend stocks.

09/30/2015 8:20 am

I just love reading how many people go on forums to ask what to do with their money. I’m always fascinated with how others handle their own money. If I got a windfall, I’d go on a vacation and save the rest. YOLO.

09/30/2015 4:38 pm

Inheritance is out of the question for me. My dad has several pieces of farmland and some golds, but I’ll let my siblings go for it. My dad has already given me the best chance at getting an education. My job now is to support him, not the way around.

As far as getting a large sum, I’ll never win lottery because I don’t buy it. If I get a settlement of any kind, nowadays, I’ll also put it in dividend paying stocks, or downpayment for a rental property. 🙂 putting the money at work, baby! Hah!

10/02/2015 2:15 am

When I was poor, it bothered me a lot that my dad didn’t even consider me as a candidate. But I also knew I don’t want to fight over them, so just take what I had, an opportunity in the promise land, America. I finance my own way with scholarship and $100k of student loan later, no good deed go unpunished. 🙂

Clarisse @ Reach Financial Independence

Wow, you guys are really lucky! For me, I would definitely invest it, treat my family for a vacation and save.

09/30/2015 6:05 pm

I only discovered Reddit this summer and I have to be careful or it will take over my life. Financial Independence and the very new Leanfire are 2 of my favourite subreddits.

10/01/2015 6:38 am

Even if money is fungible, there might be emotional consideration.

I would never use money I inherit from my parent on something other than long term investment. That’s the money pot that get passed along from one generation to the next and my goal is to add to the pot so my kids get more.

If I just win money, I would invest a large part but I would be more OK with spending a small part on luxury.

Sherry @ Save. Spend. Splurge.
10/01/2015 12:23 pm

I assume zero from inheritance, government, lottery & other sources.

That said.. I’ve saved a lot thus far and it’s all in index funds for now, although riding mostly in cash due to the economy wibblie wobblies & that I want to buy my house in cash 🙂

Great post

10/03/2015 2:06 pm

Definitely purchasing dividend stocks is what I would do if I any cash lying around. Although considering severe volatility, I may want to keep cash for discounts.



11/20/2015 6:01 am

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