7 Things to Do With “Found” Money

A roll of cash wrapped in a red ribbon.

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“Found” money is funds you never counted on receiving. Maybe an aunt left you money in her will, a family property sold for more than expected, or you were awarded a larger-than-usual bonus. Who knows? Maybe Congress will come to an agreement on another stimulus relief package, and you’ll suddenly have an influx of cash to cover bills. Maybe your found money will more than cover your expenses, and you’ll have enough to use elsewhere.

However the money makes its way to you, deciding what to do with extra funds can be overwhelming. Sometimes, when you’ve just been getting by (or not making ends meet), an extra biweekly paycheck or tax refund feels like a windfall. The most important thing to remember is that found money represents a chance to make your life a little more comfortable.

Here, we suggest seven things to consider doing when extra money lands in your lap. How much you can do depends, of course, on how much money you get. Whether it’s a lot or a little, take your time making decisions, don’t be impulsive, and make those funds work for you.

1. Build a solid emergency fund

2020 has been an awful year for millions of people — both in the U.S. and internationally. The thing about terrible years, though, is that they remind us of what can happen if we’re not prepared for emergencies. As a rule of thumb, aim to have enough money to cover at least three to six months’ worth of bills in an emergency fund, and keep your hands off the money until an actual emergency arises.

2. Be a little bit selfish

As excited as you might be that Aunt Geraldine left you 3,000 acres in northern Nebraska, you might want to keep the news to yourself for a while, particularly if you plan to sell. Everyone (and we’re talking your fourth cousin who lives in a commune in Oregon) will want a piece of the action. Give yourself time to develop a plan that will benefit your future before you share the news. Then, only share with people you know well and trust.

3. Pay down debt

If you have debt hanging around your neck like an albatross, use any found money to give it the heave-ho. Let’s say you owe $30,000 on a personal loan. You love the new bathroom the loan paid for, but the monthly payments are a pain in the side. At 9% APR for 10 years, the loan is costing you $380 per month, and by the time the loan is paid in full, you will have paid an extra $15,603 in interest. 

Using the sale of Aunt Geraldine’s farm (or any other source of found income), you might pay off the debt and save yourself $15,603 in interest payments. Now, if you instead put that $380 per month into investments earning an average of 7% annually, after 10 years, you’ll have a little over $63,000 put away.

4. Plan for the future

The funny thing about growing older is how long it takes your brain to figure out you’re growing older. If you’re healthy (and fortunate), you feel like a really smart teenager far into middle age. Plan now for your kids’ education, the beach house you hope to buy one day in Maine, and retirement. You can’t go wrong by planning for tomorrow — even if it feels like the distant future. Investing now is the smartest way to prepare for later. 

5. Be a little bit generous

It’s true, we just advised you not to be too generous, and now we’re suggesting that you open your heart. As long as you can meet your financial obligations, consider the people and causes who could use a helping hand.

Love pets? There are many excellent animal rescue associations. Are you concerned about those without enough to eat? Faithfully support a local food bank. In short, search your heart, figure out where your contributions will do the most good, and share some of your found money with them.

Did you know that people who are generous report a higher level of satisfaction with their lives? They say they have more friends who would gladly do them a favor, tend to be happier with their careers, have a more positive outlook on life, and enjoy better physical and mental health. What we’re saying is that doing for others can do an awful lot for you. 

6. Purchase necessities

If you’ve been sleeping on threadbare sheets for months, haven’t been to a hairstylist since the Clinton administration, or can feel the springs of your sofa each time you settle in, found money is the perfect way to pay for necessities that have fallen to the side of the financial road. If you’ve delayed much-needed maintenance on your home, or your car sounds like there might be a flock of seagulls living in the engine, making repairs now can save you larger repair bills in the future. 

7. Use it as a learning opportunity

Found money represents an exciting surprise. It also offers you the opportunity to learn more about finances, how to make compound interest work for you, the value of being debt-free, and other important financial lessons that you’ll carry through each stage of life. If you pay attention to everything you learn, your financial windfall will not only add to your bank account, but it will add to your knowledge bank, too. 

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