The do's and don'ts of handling financial gifts
What's the story
Getting financial gifts is a wonderful experience, but it's important to manage them wisely to ensure they do their job.
Be it birthday present, wedding gift, or inheritance, these funds can greatly affect your finances if you don't deal with them properly.
Know the do's and don'ts of managing these gifts to make informed decisions in line with your financial goals and obligations.
Save first
Prioritize saving over spending
When you get a financial gift, opt to save a little before spending it.
Putting aside at least 10% to 20% of the amount into savings/investments can benefit you long-term.
This way you can build an emergency fund or put toward your future goals like education or retirement.
By saving instead of splurging, you build a cushion for unexpected expenses.
Spend wisely
Avoid impulsive purchases
We know it's tempting to splurge on luxury when you get extra money. But impulsive purchases can drain your money without adding much to your life.
Instead, take time to evaluate what really matters and spend on things that add to your quality of life or contribute positively to your goals.
Thoughtful spending ensures the gift lives up to its purpose.
Tax awareness
Consider tax implications
Financial gifts may have tax implications depending on their size and source.
It's essential to understand any potential tax liabilities associated with receiving large sums of money.
Consulting with a tax professional can provide clarity on how much might be owed in taxes and help in planning accordingly.
Being aware of these obligations prevents unexpected surprises during tax season.
Open communication
Communicate with giver if necessary
In some cases, it may be worth having a conversation with the giver about how they would like the gift to be used—especially if it's something significant or comes with strings attached.
Open communication makes sure that both parties are on the same page about how the money should be spent.
Such understanding can keep relationships healthy while respecting any wishes attached to the gift.