DO YOU HAVE MONEY? WHAT TO DO IF YOU ARE HIT BY A SNOWSTORM

It is a windfall if you acquire an unexpected quantity of money that exceeds your usual salary. Most people would define it as any sum of money that is greater than $1,000, and the actual figure is usually considerably more than that. Profits from the sale of real estate or company or the lottery, for example, bonuses from employment; inheritances; legal settlements; profits from selling your own firm; and so on.

You should remember that rushing into something, such as a safari vacation or the purchase of an expensive sports vehicle or diamond jewelry, is never a smart idea. It’s important to talk to a tax and accounting expert about your financial status. Depending on your financial circumstances and how you manage your windfall, you may owe a considerable amount of taxes or none at all.

Investing in a market that is prone to ups and downs is dangerous. Furthermore, with the national savings account interest rate averaging only 0.11 percent (according to BankRate.com), keeping cash in a savings account means you’re losing money. Inflation is now above nine percent. If you’ve lately received a large sum of money, here are three things to think about:

Organize Your Personal Finances First.

Build an emergency fund, pay off high-interest credit card debt, and pay down a mortgage or an investment property down payment if your personal finances aren’t in shape (after due diligence, of course). Even if none of them are as much fun as paying for a luxurious trip, the long-term benefits outweigh the short-term inconveniences.

Once your finances are in order, you should set aside 10% of your income for “fun.” If you still have money to spare, or if your finances are in order, consider one of the following possibilities.

Invest in tax-advantaged investment accounts to minimize your tax bill.

401(k) plans, 529 college savings plans, health savings accounts (HSAs), and individual retirement accounts (IRAs) are all examples of tax-advantaged investment vehicles. Tax savings may be had now, but if you need the money sooner rather than later, you may have to pay fines and taxes if you put money in these sorts of accounts.

Your financial status dictates which tax-advantaged investment accounts you should contribute to. You can’t contribute to a 401(k) if you’re retired, but you may do a 529 college savings account if you have grandkids. A high-deductible health plan is a great opportunity to maximize your 401(k) contributions and contribute to an HSA to assist cover healthcare-related expenditures that you may incur now or in the future.

Get I-Bonds from the Treasury

I-Bonds are U.S. Treasury-issued savings bonds. In May and November, the interest rate is changed twice a year. If you buy an I-Bond through November 2022, you’ll get a 9.62 percent annual return for the first six months of holding. According to the Consumer Price Index, the interest rate will be increased on November 1.

Treasury Direct sells I-Bonds to the general public. In any given year, no more than $10,000 may be spent per person (a maximum of $20,000 can be spent by each spouse). If you’re under 24, you can’t buy these bonds, but you may give them to your kids as gifts (age 18 and under).

Three months of interest will be lost if I-Bonds are cashed out before five years have elapsed. State and local governments do not tax interest income, but the federal government does unless the bonds are used to cover eligible educational costs.

It just takes one phone call to get help.

Taking a deep breath and not making any hasty judgments is the best course of action if you’ve just earned a large financial windfall. Don’t hesitate to get in touch with our office if you need help handling your windfall. You’ll be pleased you did.

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Glendale

Tetyana Ser-Manukyan | Glendale Location Manager

Tetyana is a 2nd generation accountant and the Founder of Integrity Accounting Solutions, Inc. She is a meticulously organized and detail-oriented professional with over 23 years of experience in accounting industry.

Long Beach

Marilyn Motsenbocker | Long Beach Location Manager

With more than 35 years of experience in accounting and finance, her managerial expertise and knowledge add value to our firm and complement the well-being of our customers.

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