By Shelly K. Schwartz, Special to CNBC.com
Not only does found money help alleviate the stress of making ends meet, it also provides an once-in-a-lifetime opportunity to achieve most or all of your long-term financial goals. At the same time, however, sudden wealth also opens the door to a host of financial challenges.
MORE FROM CNBC
||Surprising Stock Market Indicators|
||America's Biggest Categories of Personal Debt|
||How To Open A Swiss Bank Account|
Should you use your newfound wealth to prepay debt, lock it up in CDs and money market funds to preserve your assets, or roll the dice on real estate and stocks to grow your net worth - arguably the most intriguing option today considering most asset classes are selling well below their recent highs?
The answer, says Lee Baker, a certified financial planner with Apex Financial Services in Tucker, Ga., depends on your age, assets and financial priorities.
"The first thing you have to do is step back and survey your landscape," he says. "Is the windfall enough to change your lifestyle? Does it replace income, or do you have a lot of debt and now have to go back and take care of those things that have been neglected?"
Credit card balances and car loans are "bad debt," he notes, since they not only come with sky-high interest payments, but are also tied to either a depreciating asset or purchases you've already consumed. So, if you're sitting on extra cash, knock out debt first.
Your mortgage loan may very well be another matter.
While most consider home loans to be "good debt", since it's tied to an appreciating asset and you benefit from the mortgage interest tax deduction, Baker says it may still make sense to pay down that debt.
"If your windfall is large enough that you can afford to quit working, the mortgage deduction doesn't benefit you anyway [since you no longer collect income to apply the deduction towards]," he says.
If you plan to continue working, however, or expect to make significant annual withdrawals from your IRA or other retirement accounts, keep the mortgage for its write-off value and invest the money instead.
Such an approach can also buy you piece of mind.
"Maybe you come into $100,000 and you decide to put that money into a college fund for your kids," says Baker. "You've always worried about whether you'll be able to pay for their education and now you've alleviated that burden. That may be worth it to you."