Written by Carrie Johnson (former SDSU Extension Family Resource Management Specialist).
Calf prices are setting records this year and now that you have sold; you are looking at a substantial increase in spending money. A major decision that needs to be made is whether or not profits should be used for personal use or to reinvest that money back into your operation. If you choose to spend some or all of your new found fortune on yourself and your family here are some smart ways to make the money work for you:
Start or Increase Emergency Savings
Do you have money set aside in case of an emergency and you can’t work? Having enough money for 3 to 6 months of household fixed expenses is always a smart idea. By using some of your new money, you can be more secure for an unsure future.
Pay Off High Interest Debt
You can pay off or pay down high-interest debt that you’re carrying in loans or credit card balances. By paying off debt, you will have more money each month to put towards other debt, expenses, or savings.
Add to a Retirement Account
Contributing some of your money to a Traditional or Roth IRA in one lump sum can help make your retirement years more comfortable. Not only are there tax benefits from making and adding IRA contributions, but you’re doing a good thing by saving more money for your future. In 2014, you can contribute up to a combined amount of $5,500 ($6,500 if you’re age 50 or older) in your IRA accounts. If you want to put even more money away, look into a 401(k) where you will have more control over your investment.
Purchase Something You Need
Is the furnace in your home up for another cold winter? If not, use some of your money to replace it. Not only will it increase the value of your home, but by having a more efficient heating system you will save money in the long run. Look at other possible maintenance projects around the house that will save you a headache down the road or save you money every month that can really add up.
Purchase Life Insurance
Now might be a good time to look at purchasing a life insurance policy to protect your spouse and/or children who depend on the income you bring in from the farm/ranch. Work with a professional to see what type of policy will fit your needs best (term or whole). You may want to start with a term policy that can be converted later
All of the above suggestions are a way to use your money responsibly. But, you worked hard for that money and you should celebrate even if it is just something small. You don’t need to spend it all on a big vacation, but taking time to enjoy your success is important.