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windfall [ˈwɪndˌfɔːl]
n
1. (Economics, Accounting & Finance / Banking & Finance) a piece of unexpected good fortune, esp financial gain

When life gives you lemons, you make lemonade.  When life gives you a cornucopia basket, things get more complicated.

When you’re in debt and you get a big lump sum of money, it’s tough to know what to do.  Commonly known as a windfall, this can come from an inheritance, legal settlement, life insurance payout or lottery winnings.  The easy answer is put it all towards your bills, but as is often the case in life, the easy answer isn’t always the right one.

I had to grapple with this “problem” when I received my most recent sales commission check, which was the biggest in my career.  While not exactly a windfall (as I worked my butt off for every dime) it’s still a good sum of money that I don’t get on a regular basis that I have to decide how to spend.  Basically I was torn between paying off debt, saving for the future and spending it on purchases that otherwise could have been held off (i.e. discretionary items.)

Typically the best return on the money comes from paying off debt, especially credit card debt.  When banks are paying less than two percent on savings vehicles and charging upwards of 20 percent for revolving credit, it may seem like a no-brainer.  However, one of the problems with using a windfall to pay off debt is that it’s also the most restrictive option.  Once you pay down a bill, you should consider that money gone.  If it’s a car loan, mortgage, student loan or other installment credit vehicle then you won’t be able to tap into that money ever again.  If it’s a credit card or line of credit, the issuing bank can reduce your limit or close the account.  If an emergency arises, you may wish that you held some of that money back.

Saving and investing is another option, but it typically means that you’re still carrying debt that you’re paying a higher rate on.  But, as long as you invest wisely, you have the flexibility to pay off the debt later or have a rainy day fund for when things get really bad.

Of course paying off bills and putting money aside for the future aren’t nearly as much fun as buying an iPad or taking a trip to the beach.  It’s psychologically very difficult to see money pass through your hands without any real emotional enjoyment.  Although you may have more peace of mind when your bills are paid or you have a cash cushion, it can almost seem like you got no windfall at all.

One of the biggest challenges in getting a windfall is keeping the news of it to yourself (and spouse if you’re married.)  Because despite how much you will want to brag about your good fortune, this is one of the worst things you can do.  You don’t have to look very hard to find examples of lottery winners, professional athletes and others who lost everything (including their lives) when preyed upon by greedy family members and other hangers-on.

After a lot of thought I decided to allocate my commission check this way:
-75% for debt reduction
-15% into savings (including 5% in automatic 401(k) investments) and
-10% towards a new kitchen, which is something I can see and feel every day, reminding me of why I work in the first place.

Think I made a mistake?  Have at it in the comments.

As we gather around the country to celebrate our nation’s independence,  it’s tough for many Americans to be in a real good mood when the recession has tread all over our financial freedoms like King George himself.

But while things look bleak right now, it’s important to remember that after all these years, the good old U.S. of A. is still the place to be when it comes to the pursuit of happiness.

So in honor of our country, and in no particular order, here are one hundred reasons why America is still the land of hope and opportunity.

Happy Fourth of July!

1. The Bill of Rights
2. Meritocracy
3. New York City
4. Radio
5. Television
6. The Internet
7. Minimum wage laws
8. The Wall Street Journal
9. The Daily Show
10. Major League Baseball
11. Family farms
12. Megafarms
13. OSHA
14. Oprah
15. Cops
16. Teachers
17. Firemen
18. Nurses
19. Risk
20. Reward
21. The Dollar
22. Gold
23. Networking
24. Electricity
25. HR
26. General Motors
27. Working your way through college
28. Student loan programs
29. 529 Plans
30. Rich uncles
31. Airlines
32. The Gap
33. Lawsuits
34. Pro-bono lawyers
35. Cubicles
36. Free and open elections
37. Nike
38. Recycling
39. E-mail
40. Free public education
41. Exports
42. Imports
43. Charities
44. Free textbooks
45. Free school lunch
46. Starbucks
47. Social Security
48. Pensions
49. 401(k) plans
    
50. Venture capitalists
51. Dot-coms
52. The child tax credit
53. Tipping
54. Amtrak
55. Cash
56. Credit
57. Chicago
58. Municipal drinking water
59. McDonald’s
60. The NFL
61. Insurance
62. Watchdogs
63. Whistle-blowers
64. Medicare
65. The FDIC
66. Apple
67. Alan Greenspan
68. The National Guard
69. Automatic teller machines
70. Debtbeat
71. Las Vegas
72. Coca-Cola
73. The mortgage interest deduction
74. Wal-Mart
75. Hospitals
76. The Postal Service
77. Happy hour
78. Warren Buffett
79. Bill Gates
80. Boston
81. Freeways
82. Ford
83. Weekends
84. Holidays
85. 5 o’clock
86. Garbage collection
87. Sewage treatment
88. Google
89. College football
90. The U.S. Armed Forces
91. Hollywood
92. Democrats
93. Republicans
94. The Tea Party
95. Raises
96. Bonuses
97. Commissions
98. Praise for a job well done
99. Washington, DC
100. Sea to shining sea….

Getting out of debt is stressful enough, and reading about debt management all the time can be depressing (even if you’re reading a lighthearted and exceptionally well-written blog like Debtbeat.)

So while we offer up our suggestions on the best credit management books in our Required Reading section, today we’ve got something new and exciting for you.  If you can believe it, we’ve gone into our pop music archives and put together our collection of the hottest tunes to get your fiscal funk on.

These are money-themed records that actually don’t suck.

We’re sorry that Eddie Money and Johnny Cash didn’t make the cut, but check out these albums and let us know who we missed in the comments.

• To kick it off, how about Get It on Credit by Toronto? Isn’t that how most of our money troubles begin?
• And once you’ve charged it all, then come the Bills Bills Bills. (Thanks, Destiny’s Child.)
• There’s Life & Debt, a reggae compilation featuring the Ziggy Marley.  Because only Haiti knows more about being broke than Jamaica.
• Of course a lot of our problems have been caused by the housing bubble, driving many people into Foreclosure. Which is also a hot album to listen to while driving.
• You don’t want to go Bankrupt, but you do want to get that album. This Dr. Hook masterpiece is more old-school than saving for a rainy day.
• Need to cut spending, try a budget.  Or if you’re a fan of the Kinks, a Low Budget.
• From 50 Cent we have Get Rich or Die Tryin’.  Unlike other rappers (I’m talking to you, Hammer) Fiddy isn’t hurting for cash after making $400 million on a deal with Vitaminwater.
• Young Jeezy gives us The Recession, which features very explicit lyrics.  Fitting, since this economy has a lot of people swearing and threatening violence.
• Ask Tiger Woods about Love vs Money. The loverboy of the links has now lost millions in sponsorships and tour winnings.
• Remember that slow and steady wins the race. Earn more, spend less and take control of your credit. In no time at all your debt will be Paid in Full!