A windfall can either be a lifeline to short-term financial relief or a stepping stone to long-term financial stability. But because of our inherent money personality, we may not make the best use of the surprise cash.
MONEY DECISIONS AMID A CRISIS
A 2021 study published in Journal of Family and Economic Issues found that emotions tied to money can dictate whether we decide to spend or save a windfall — even in a crisis environment.
The research examined how recipients of COVID-19 relief checks used the money. People with existing financial resources who were previously inclined to save and invest did just that with the COVID-19 windfall, says Sarah D. Asebedo, lead author of the study. Asebedo holds a doctorate in financial planning and is an assistant professor at Texas Tech University in Lubbock, Texas.
“When people with those characteristics enter crisis environments, they likely have built some resilience in their financial situations such as an emergency fund or having investments,” Asebedo says. “So they might use their windfall on things like ‘wants’ or further saving and investing because that’s what they’re wired to do to some degree.”
Those who needed to make ends meet during the pandemic mostly used the money to pay off debt, Asebedo adds.
DEFINING YOUR MONEY PERSONALITY
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