Have you ever thought about what you would do if you suddenly had a $10,000 windfall? Perhaps a relative left you a portion of their estate, or maybe you win the lottery (which I wouldn’t recommend playing by the way), or you have an anonymous check show up in your mailbox with no explanation. What would you do with the money? Put it toward a brand new car? Start hunting for a bigger house? Buy a boat? Perhaps you’ve been wanting to fund the future education of your child, so you put it into a 529 fund. Whatever your thoughts, take a second and write down what your $10,000 would do for you.
Your Financial Maturity
Did you write down what you would buy with the $10,000 yet? If not, at least get an idea of what you would do with it in your head, and be honest with yourself. If you just want to host a massive party, then write that down.
Many of us don’t ever think about the what ifs of life. We just figure that we’ll never have any extra money, so why would we waste our time dreaming about what we could have when that check is truly never coming in the mail? This lack of preparation becomes mighty dangerous if we do ever come across some extra money though – even if it’s only $100. So let’s discuss what you would do with your $10,000 if it landed in your lap.
A Trip to Vegas/Throw a Party = 0
On a scale from 0 to 10 (zero meaning financially mature and ten being very financially mature), taking an immediate trip to Vegas with the intent of blowing it all at the casino, shows, and hotel expenses is incredibly irresponsible and quite selfish. Sure, it would be pretty fun, but is a week of entertainment really worth it? If you spent your money in this manner, chances are that you will regret it years from now.
A Brand New Car (or boat) = 2
Many people would use the $10,000 to buy themselves a brand new car. Of course, $10k would buy them the whole car, but it might cover 1/3 of it, which would allow them to afford the remaining payments. So yes, you would feel important in this car and it might feed your ego for a while, but in the long run you have purchased a depreciating asset and will lose much of your “investment” in the first four years of ownership. This decision would receive a 2 on our “Financial Maturity Scale”.
A Brand New Kitchen = 4
Some of you have a kitchen from the 1980’s and would really like some updated appliances and cupboards. $10,000 won’t get you everything you want, but it’s a start. I consider this usage of the money to be in the lower-mid range of our scale because the renovation will allow you to fetch a higher dollar amount when you sell your house, but until you put your house on the market it will not produce any money for you and that money is gone forever. You can’t exactly return your cupboards once they’re installed.
Earn 1% In Your Savings Account = 6
Others may be completely uncertain of what to do with the cash. Afraid of making a financial mistake, they just stick the $10,000 in the bank account to earn 1% interest. This move certainly isn’t going to make you rich (in fact, you’d be falling behind when considering inflation), but at least your money is liquid in the event you need it and it is earning a little bit besides. Financial wisdom rank? 6.
Putting It Into a 401k/529 fund = 8
Investing your money for the future is a fantastic idea and receives an 8 on the wisdom scale. Instead of earning a measly 1% in your savings account, you will likely receive 8% or more each year until you pull the money out for retirement. The only downside is that you can’t change you mind after doing this since you will be penalized for any withdrawal you make before the age of 59 1/2.
Investing in Property, Real Estate, or Your Own Business = 10
The wealthy love to talk about their business ventures, house rentals, and land leases. They can freely move their money around without penalty and the potential earnings amount is limitless. If you intend to use your $10,000 in this way, then you are well on your way to becoming a very wealthy individual.
Earn the Money and Spend It Wisely
Many of you might still be arguing with me in your mind because you will never inherit that $10,000. However, I would challenge you to think in reverse. If your mindset is a zero or a two on our scale, then it is quite obvious that you will never earn your way to that $10,000, no matter how much money you bring home from your job. However, if you have the mentality of the wealthy and continually invest your additional money (in small increments at a time), then your wealth will eventually grow that $10,000 mark and will continually skyrocket as you keep investing! Learn to think like the rich and you will grow rich yourself.
What would you do with your $10,000?
Get the FREE Personal Profitability Playbook
Earn more, spend thoughtfully, grow your wealth, and live a better life through mindful personal finance.