‘Free Money’: What do you do with it?

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It’s tax season in many countries in the world: U.S., UK, and here in Taiwan, too. It’s time to pony up our share of our ill~ (well?!) gotten gains for the previous fiscal year, and that got me started thinking about ‘free money.’What is ‘free money’? Well, in some cases, it’s really free. You win the money in a competition, you inherit some money, you earn a surprise bonus, a stock suddenly bounces, whatever. This money came to you from the Goddess of Fortune. In other cases, ‘free’ money isn’t quite so free, but still it can be a big benefit.

‘Free money’ like that may come from many places, money that you dropped under the sofa, lay hidden in a bank account that was forgotten about, you loaned to a friend that was unexpectedly returned, a tax rebate… the list goes on. The key point to such money is that it is yours, but it was not available to you to spend or invest until you reclaimed it some how.

The temptation when you find such ‘free money’ is to spend it, because you want something in particular, and didn’t have the money for a purchase. In reality, this is a bad choice, because saving or investing ‘free money’ will always produce a bonus of some kind in the form of interest or dividends or capital appreciation. Also, over several years, such little amounts of ‘free money’ can, in fact, add up to quite a large some, larger than you might otherwise expect.

An example: in 1999~2000 our landlord, for various tax reasons (I don’t quite understand) returned our full year’s rent, that was about $8350. Then when we mortgaged and remortgaged our house a few years ago, because the paperwork took a while, we didn’t have to pay a mortgage payment for one month. That saved about $600. About three years ago, a relation returned our $3,500 loan now that they had the means to do so. Adding up all those amounts, we get about $12K. That’s not bad for free money.

Of course, there have been other occasions when we have received such ‘free money’ in smaller amounts, but the money has been spent or invested without us knowing or being able to account where it went.

So, this year, if you get a rebate or inheritance, don’t go out and buy a boat or a 2nd car or remodel yourself or your house. Think intelligently, and if you really want any of those items, work out a way to get the money from your regular budget. Put the ‘free money’ to use in your investments, whether it is tax free or not. It will add up quite quickly, and produce a loot more!

What kind of ‘free money’ did you receive? How did you manage it? Well or badly? Share your story with us!

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