Its odd how when you don't have money, you cant stop dreaming about it and when you do, you keep worrying about losing it. It doesn't have to be that way. We think having extra cash on hand and thinking about different places to invest is a nice problem to have. This is a different scenario from your typical investors. Most people invest a small percentage of their pre-tax salaries in a retirement account on a monthly basis. This is where you take advantage of dollar-cost averaging and compound interest over the long run to become wealthy.
On the flip side of the coin, a few fortunate souls get an unexpected windfall. They receive an inheritance, win the lottery, get an insurance settlement or a nice bonus. Rather than let your imagination run wild with different scenarios, lets imagine that you are looking to invest ,000 to start with. This five-figure some is serious enough to make you start thinking about investing it seriously to generate a return on your money rather than just spending it on 'stuff'.
There are 3 questions that you will probably consider when it comes to investing your money:
1) Which parts of my financial life were stressing me out the most? Prior to receiving the money, what were you most worried about? Were you thinking about your kids eduction? Then open up a savings account or investment account for your kids education and make a plan for regular small contributions to it. Were you thinking about getting together funds for your wedding or money? Set this money aside for that. Even though, we don't think spending huge sums of money on one day of your life is not the best way to spend money, memories and experiences are important. For a down payment on a house? Whatever else you need money for. Set the 10K aside in a checking account and spend it only for that.
2) How will I give back? A lot of people feel that they will make a contribution only when they start earning 0,000 annually or when they reach some magical number in their net worth. We have news for you. Most people contribute time or smaller amounts of money to their favorite causes when have a little money. A lot of people think they are going to give back at some point in the future but they never get around to it. You should realize how fortunate you are to have money to put away or invest. Give back in time or money to your favorite cause.
3) What is my investing horizon or how long am I investing this money for? If you want to keep this money in an investment where it is readily available to dip into for cash reserves then you will choose different investments such as high-interest checking, CDs or money market funds. However, if you are investing for longer periods of time then you can invest in stocks, bonds or other investments that have historically given better returns on your money.
