So you got a windfall: save or repay?

What do you do when you find yourself with some extra cash? Some say that it's best to save, others say it's best to invest, and still others say it's better to pay down debt. So who do you trust? How do you decide what to do with that windfall?

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What's the best thing to do with extra cash?

Whether it's good luck or hard work, you may find yourself with some spare dollars left over at the end of the month. It could be an inheritance, a gift, or the proceeds of a bonus, commission or time-and-a-half over a public holiday. Whatever the source, as a money savvy Kiwi, you might wonder how you can make the most of that extra money.

• The Emergency Fund. Some people choose to put the extra cash away for a rainy day, adding or starting an emergency fund to cover off unexpected expenses like a broken down car or medical issue.
• The Investment. Some people put that cash into stocks, shares, term deposits, or similar, so that they can earn interest and/or dividends to growth their wealth.
• The Repayment. Rather than save or invest, some people like to repay their debts to reduce the interest they're having to pay and the length of time they have to pay it.
• The Spend. A sudden windfall could be the final piece of the puzzle for that Thing you've been working towards. Spending can be just as important as saving!

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Is there a simple answer?

What's the best option? Well, like all things money, it depends. One of these options - or none of these options - could be a good choice. It all depends on someone's circumstances and their priorities. There's no one size fits all.

For example, someone might decide that paying down their debts is the most important thing for them right now. Maybe they've got debts with big interest rates (did you know that there are some lenders still charging close to 50%p.a.?!). Maybe they've made it a personal goal to smash down their debt so they can focus their money on more interesting things. Or maybe they want to take out a mortgage, but their existing debts are holding them back. Telling that person that the one-and-only true answer for that windfall is to save it up or invest it? Well... that might come across as a little silly.

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Quick summary

Here's the takeaway: money is mahi. Hard mahi. A big part of that hard work is taking the time to figure out what your priorities are when you have some spare cash left over. There's no single correct answer - but there might be a more correct answer for you. The only way to make that clear is to do the numbers, consider your goals, and maybe seek the advice of a qualified financial advisor. Never let anyone make it sound like taking charge of your money is simple. It's not - but we reckon that nothing worth doing is ever easy!

So, how would you use a surprise windfall?

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