7 Tips to Manage Bonuses, Gifts, Other Windfalls in Today's Economy

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Bills.com suggests 7 smart ways to make money work for consumer.

The 2008 federal government's economic stimulus payment program put $152 billion toward increasing Americans' cash flow. Later this year, many consumers may receive commission checks, end-of-year bonuses, inheritances or gifts. Bills.com president Ethan Ewing reminds these fortunate recipients that their decision about how to use extra cash can make a big difference.

"No matter how big or small the amount, and despite the temptation to celebrate and splurge, make your choice on what to do with an unexpected windfall carefully," suggested Ewing, who is president of the free online consumer portal. "In an uncertain economy, it is all too easy to act before thinking. Take time to make sure you put any and all money to work for you."

Here are Ewing's suggestions of smart ways to handle any additional money:

1.    Eliminate debt. Few investments can top the rate of return for eliminating debt. Paying off credit card debt at typical interest rates effectively makes an investment that returns 20 percent or more per year. "The only caveat: Be certain you change your mindset as well," Ewing said. "If you pay off debts, only to charge up the credit cards or sign for a new car loan a few weeks or months later, you have ultimately gained nothing. If credit card debt is your problem, for example, cut up or freeze your credit cards to ensure you do not re-create the same problem you have left behind. Use a debit card for future purchases that require a card." Bills.com offers more ideas on eliminating debt at http://www.bills.com/eliminate-credit-card-debt.

2.    Invest in retirement. For someone who is not in dire, immediate economic straits, investing a windfall in a retirement fund is an outstanding choice. Investing $10,000 in a tax-benefited investment plan that earns 8 percent interest will generate nearly $40,000 in returns over 20 years.

3.    Save the money. Those who do not yet have an emergency savings fund -- enough readily accessible money set aside to cover several months' worth of expenses -- should consider a windfall a prime opportunity to create that fund. An emergency fund should be in a savings or money market account where funds can be withdrawn without undue complications. "However, do not make it too easy to retrieve the money," Ewing cautioned. "If your checking account automatically transfers savings to cover overdrafts, careless management could result in your emergency funds dwindling to nothing."

4.    Invest in a home. Those who are already en route to purchasing a home could find that a windfall helps with a down payment, especially in today's buyer's market. Nevertheless, do not purchase more home than you can afford. The monthly payments will continue long after the windfall has been invested. If you already own a home, using some of the funds to take care of small upgrades and larger repairs around the property can be an excellent way to maintain your investment. Learn more about home buying at Bills.com's Mortgage Loans portal at http://www.bills.com/mortgage/.

5.    Invest in yourself. Have you ever thought about returning to school, or taking some classes to advance your career? A windfall can be just the push you need to take that leap. "Furthering your education, when planned properly, can improve your career and result in higher earnings -- improving your financial prospects for the rest of your working life," Ewing said.

6.    Give yourself a boost. If you have your emergency fund covered, consider using the money to pay off a car loan (or a mortgage if the amount is large enough) or purchase a needed vehicle outright. By eliminating auto loan or home loan payments, you could gain breathing room to secure retirement, consider a career change or take a sabbatical.

7.    Split it up. If you cannot decide, divide the windfall into segments. "Save one, invest one, pay down some debt, and - if possible - use one piece to purchase something for your home or take a relaxing, memorable weekend away," Ewing said.

"Whatever action you decide to take, sleep on your choice before you put it into effect," Ewing advised. "The last thing you want is to look back and wish you had made more of your windfall. If you make a sound choice for your personal situation, your money will continue paying benefits for years to come."

About Bills.com (http://www.bills.com)
Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 40,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. Its RSS feed is available at http://www.bills.com/news_releases/.

Bills.com holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine's Hot 100 list of the fastest-growing U.S. companies. Bills.com also was named a finalist as "most innovative company" in the American Business Awards in 2008. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and are recipients of the Northern California Ernst & Young 2008 Entrepreneur of the Year Award.

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Aimee Bennett

Ethan Ewing
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