As a journalist, I understand the importance of finding a balance between enjoying life and securing financial stability. That balance can be difficult to find, especially when faced with a windfall such as the $225,000 that one reader is receiving tax-free from the World Trade Center Health Program. Here’s some advice on how to make the most of that money.
Firstly, it’s important to remember that unexpected expenses can arise at any time. Therefore, it’s recommended to maintain an emergency fund of at least six months of expenses in a high-interest savings account, or higher if anticipating a large transaction in the future, such as a medical procedure.
Next, it’s important to focus on building overall financial health. While windfalls are a unique opportunity to indulge in life’s luxuries, it’s recommended to allocate 50% to 75% of the money towards improving your financial health. This could mean making additional retirement contributions or investing in low-risk options.
When it comes to investing, it’s essential to know your current risk tolerance and when you plan to draw from your retirement accounts. High-yield savings accounts or CDs can provide a safe option for those who want to save rather than invest.
It’s also recommended to make home improvements or purchase comfortable furniture, leaving room for adjustments in the future if mobility becomes limited. And of course, if you enjoy working as the reader in question does, there’s no need to retire fully. However, it’s important to plan for retirement by setting aside enough money to comfortably retire.
– Fidelity recommends having 10 times your salary by the time you’re 67.
– The annual limit on contributions to an IRA will increase to $6,500.
– The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan will increase to $7,500.
While a windfall can be exciting, it’s important to focus on building overall financial health and maintaining an emergency fund. Low-risk options such as high-yield savings accounts or CDs can provide a safe investment, and improvements to your home can offer long-term comfort.
In conclusion, it’s essential to find a balance between enjoying life and securing financial stability. By focusing on building an emergency fund, improving overall financial health, and investing wisely, you can make the most of a windfall and enjoy the comforts of life.