Taking Advantage of Financial Luck

Life is unpredictable, especially when it comes to finance. It seems like every unexpected financial event is negative, but sometimes the news is good. We just had a pleasant financial surprise — we received a $10,000 inheritance! Here is how we are handling the financial luck in a responsible fashion, and what you can do as well.

Build an Emergency Fund

This is a crucial step in achieving any level of financial comfort, and it should be the first step you take before doing anything else. In fact, Dave Ramsey puts this as his #1 of his 7 Baby Steps, which has helped thousands of people get out of debt and achieve financial freedom. By having a minimum of $1,000 in your savings account, you are able to fend off most unforeseen financial events. Just as finance can be good to you, unexpected expenses are far more common than unexpected checks.

Another expensive, unexpected cost. Don’t worry, the car is sold now!

Thankfully, we have already taken this step. We currently have $6,781 in our savings account — far more than the suggested minimum of $1,000, but then again, our unexpected expenses tend to be far larger than average. Not to mention, the nature of my wife’s work (software) means that she could be laid off without much warning for reasons outside of her control. So, it is smart for us to play it safe and have a little extra cushion. Fortune favors the prepared!

Act Like Nothing Has Changed

When you come into some unexpected money, it is important to keep your goals in mind. For us, that means paying off our $110,000 of debt. If you follow our progress, you can see that we are currently at $94,100 of debt — a good step in the right direction, but far from being debt free.

Since we have already achieved the first step of building an emergency fund, the next step would be to throw all of the money at our current goal of paying off debt. This is easier said than done, not because it is logistically challenging, but because it is a test of strength of will. Even though I literally just wrote about renting vs. buying a home, and determined that renting was currently best for us, I was still swayed in the moment that all of our newfound money should be put toward a down payment on a new home. The money was burning a hole in my pocket, and my impulsive brain wanted to spend it all on yet another status symbol. Thankfully, my wife was able to talk me down from the ledge to a more reasonable conclusion.

Your long-term financial plan should be your go-to in any monetary decision making. For someone like me, I have to be reminded often what our goals are, and it can be challenging to stay focused in the long run. If you are like me, a commitment device is essential to staying on track. I personally have two major commitment devices: my wife and my blog. Both of these keep me in check, which is essential for long-term success. Avoiding public humiliation is always a good motivator. 😉

In the end, we stuck with the plan. We are going to put all of the money to the debt. Every. Single. Dime. And that’s tough, but it is the right thing to do in our situation. We have set aside $3,000 every month to budget for loan repayment, so expect a $13,000 loan payment around the middle of the month. I will be sure to post the proof to Twitter!

Honor the Source of the Money

It is important to consider the wishes of the person or entity that gave you the money in the first place. If the money was earmarked for a specific purpose, you should do your best to honor the intent of the funds. If a relative were to give you $10,000 specifically for a down payment on a house, then it should be your first priority above all else. Intentionally misappropriating money given to you by a loved one is morally compromising, at best.

However, I am a realist. I spent the vast majority of my life without a comma in my bank account. I know what it is like living paycheck to paycheck. So, let’s take the example above and assume that you are very broke and receive $10,000 for a down payment for a house. What if you don’t have an emergency fund in place? What if you don’t have enough money to pay the bills? Are you still obliged to spend everything on a down payment?

The answer gets a little muddy, but it boils down to this: You have to take care of yourself and your family first. If you don’t have a dime in savings, you certainly aren’t in a place to buy a house. Consider taking $1,000 and putting it in a cash savings account, and then putting the rest of the money in an account that is more difficult to access. I would suggest a low-cost brokerage like Vanguard, invested very conservatively, that way the funds are difficult to access in times of weakness. As a bonus, the money will have the opportunity to grow modestly while you get your finances in order. When you are finally in a position to afford a home, the money will have the same buying power by keeping pace with inflation. By doing this, you position yourself to be a responsible steward of the gift bestowed upon you.

Thankfully, there were no such stipulations with our recent financial luck. Still, we felt a duty to stick to the plan. And I am proud that we have done so.


Have you ever received an unexpected, large financial gift? What did you do with it? What would you do differently? Tell us in the comments below!

5 Replies to “Taking Advantage of Financial Luck”

  1. I believe that those who are responsible with money attract more of it and vice-versa….there are no accidents. So in spite of an inheritance meaning that someone passed on I don’t think it inappropriate to say congratulations because it’s your responsibility that attracted the bonus. While I’ve never received any windfall of cash unexpectedly, (except for the occasional $20 bill in my jeans pocket after doing laundry) I agree fully with your thought process and ultimate decision. Also, unless the person who left you the money had intimate knowledge of your family’s financial situation, goals and priorities I wouldn’t worry too much about the earmark instructions. I.E. if instructions were to go on a luxury vacation, I’d have no issue whatsoever about using it instead to pay off the debt. My thinking is that it would bring my family more true joy and get us closer to FI where could then take that vaca at some future point where could actually enjoy it without guilt. Good work bruh!!

    1. Good point about the intent of the money. It would be rather irresponsible to spend on a vacation when you are in dire financial straits. I guess I should specify that you should spend the money as intended if, and only if, it is financially feasible and responsible.

  2. My mom passed away when I was 25 and left me a sizable inheritance. Not trust fund quit you job and travel the world size, but definitely way more than most 25 year olds have. I take out the minimum distribution amount once a year from the retirement accounts she left me. So far it’s never been more than $2,000 but I have half withheld for taxes. She left me a rental house and I use that money to live on, but as I go further in my career I depend on the rental income less and less.

    I could sell the house, and that’s probably the wiser financial decision, but it was my mom’s and I am emotionally attached to it. I like the idea that even if everything in my financial life went wrong I still have a place to live for basically free (it has no mortgage.)

    I have never thought of the retirement accounts as my money. My mom worked too hard for me to blow that money on things that I like to blow my own money on. I try to be a good steward of that money and know that I have the ultimate safety net-like my mom is still protecting me even though she’s no longer alive. I would consider cashing it out for an income generating thing-another property or if I wanted to start my own business.

    I am amazed that you had the fortitude to put every single dollar towards debt! That will be a gift that keeps on giving.

    1. Firstly, I’m so sorry to hear about your mother. My wife lost her father in her early 20s as well. And I know how tough that can be.

      I love the mentality that it isn’t your money. She worked very hard for it, and I’m sure she’d be proud to know that you are using her gift to you responsibly. I’m sure the goal of most parents is to give their children a life better than they had, and even though it may not be enough to never have to work again, it is a wonderful way to start your adult life.

      Even if you don’t sell the house, which may be the wisest option, there is a phrase that I heard recently that reminds me of this situation: “Good, better, best.” Basically, even though not selling is not the most optimal situation, continuing to rent it is still a viable financial option which allows you to hold on to something that reminds you of your mother. It may not be the “best “option but it is certainly A good and honorable option. Thanks for reading!

    2. Jax,
      Kudos to you! Well stated and sincere. Means a lot when coming from such a personal experience.


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