Repaying student loans — or other large debts — can be a long, hard road. Suddenly coming into some cash, however, could provide a significant shortcut.
Here are 13 types of financial windfalls to anticipate (or at least dream about), along with tips on what to do with the windfall once you receive it.
From your employer
1. Signing bonus: Some occupations, especially medical professionals, could receive a student loan repayment bonus when starting a new job. Not all careers offer this (or any other no-strings-attached payment), but it’s worth asking a prospective employer before you agree to join the team.
2. Salary raise: Once you’ve shown your value to your boss, it could be time to ask to be paid what you’re worth.
3. Stock payout: Whether you’re awarded shares of a public company or stock options at a startup — or are an investor yourself — your eventual cash payout could be significant.
From private companies
4. Consumer perk: Companies sometimes reward their customers with cash. In some cases, they give out funds specifically for student loan repayment, as with Burger King’s Whopper Loans promotion or the Hyundai’s Student Assurance program.
6. Luck of the lottery: Sweepstakes-style contests could provide life-changing amounts of money — but your chances should leave you wondering whether it’s worth buying a ticket.
From the government
7. Tax refund: You might be used to seeing a check from Uncle Sam every spring, but keep in mind that receiving a big refund isn’t really a good financial goal.
From your family
8. Holiday gift: One of the best ways for family, friends and colleagues to celebrate your birthday is to support your student loan repayment, possibly using a service like Gift of College.
9. Inheritance: Being left money in a will doesn’t make up for losing a loved one, but their financial legacy could be substantial enough to do some good.
From your insurance
10. Successful claim: You might have enough money from an insurance claim to both repair damage to your home or car and also help accomplish other financial goals. That could be the case if you receive a home insurance payout, but then pick up and move to a cheaper place.
From your investments
11. College savings cashout: If your child doesn’t use the money you previously put aside for their education, it could be useful elsewhere. Be aware, however, that 529 plans charge penalties for non-qualifying withdrawals.
12. Property sale: Selling your car, company, house or other property could yield a bigger return than you might expect — one that could make a real dent in your debt.
From the courts
13. Lawsuit settlement: Settling your debt for less than you owe is one thing, but winning a court judgment could end your debt and line your pockets. In fact, if you manage to collect settlement money from a suit against your college or trade school, it could help get rid of your student loans in more ways than one.
What to do with financial windfalls
The best piece of advice regarding what to do with financial windfalls is… to do nothing at all, at least not right away.
A windfall could blow you in a whole new direction. You might be excited enough to make an impulsive purchase, for example.
To avoid wasting your new wealth, make a plan for how to handle it temporarily. You might review the best place to stash it among your savings, or consult a financial planner about tax implications.
Once you’ve caught your breath, consider all the responsible ways to utilize your windfall, including:
Build or replenish your emergency fund
Creating an emergency fund while repaying debt is no simple task, but a windfall could certainly make it easier. Most experts agree your fund should comprise three to nine months’ worth of salary — or more, depending on your family size, financial obligations and job security.
Repay high-interest debt
Credit card debt, rather than your student loan or mortgage payments, might be the bigger priority, depending of course on your interest rates.
If you’re wondering whether you should invest before paying down debt, plug your details into a debt-or-invest calculator. Account for the non-mathematical part of the equation, too: If your debt takes a toll on your emotions, for example, you might prioritize repaying it, regardless of what the numbers say.
Submit a lump-sum payment toward your student loans
Sending in multiple payments per month is one of the best strategies to end your education debt ahead of schedule. The same is true of making one gigantic payment.
Invest in the market
You don’t have to pour a lot of money into the stock market to become an investor — $100 is enough to get started.
Whether it’s an expected or surprise windfall, you could add to the brokerage account you use to save up for a home, or simply catch up on your retirement contributions.
Invest in education
Investing in yourself or your family could be another good way to make the most of your windfall.
Continuing your education could help you transition to a career that makes you happier and, ideally, leads to another windfall down the line. You could also supercharge your kids’ 529 college savings plans, so that they never have to deal with student loan debt themselves.
Donate to charity
While addressing your most dire financial goals, you could help others in your community address theirs. Just ensure the philanthropic organization is legit before opening your checkbook.
Don’t sit around waiting for your windfall
You might come into cash through a stroke of luck. You could also receive some through a stroke of genius.
So instead of waiting around for your raffle ticket number to be called or your tax refund to arrive in the mail, ask yourself what you can do to increase your income. Consider some of the many strategies to earn a four-digit windfall that could also help you achieve some of your more ambitious personal finance goals.