Let’s say you are 21-27 years old and receive gifts for some special occasion; wedding, graduation, etc… What will you do with them? What should you do with them? Here’s my thoughts. I’m open to discussion.

Gift money is an especially dangerous opportunity. An opportunity that can have big rewards or just blown or wasted in a minute. Many use it to “reward” themselves when gifts can best be used for your own good in much more meaningful ways—and usually what the giver hopes for.

It’s not easy or natural though. So, I have the conversations ahead of time with clients about their expected inheritances. Many don’t “plan” on their inheritance. In some sense, gifts are similar. Many don’t “plan” on them. So, when they come, they waste the opportunity.

If you are prepared and have a plan for gifts. When they come, you’ll be better prepared to use them to your advantage. Because they’ve prepared, my clients have specific plans for when (if) gifts come. Recently I had a client receive a rather substantial gift and they put most of it towards their new house fund. We call this their “MatterFund”. What matters to them at this time is the savings for a new house—they expect to purchase within the next 18 months.

This client has two other MatterFunds; emergency and new family expenses—as they are also planning for a new family. Can you imagine the planning they are doing knowing what will change for them? Are you in a similar situation? Are you ready?

Other things young people can do with gifts is put their gifts to work in their overall healthy financial lifestyle. Many choose to pay down debt. Those with either law school, medical school, or other school debt, some to the tune of $250k, can make substantial dents or completely eliminate their balances. Paying that down is of primary importance and will put them more quickly on track towards their other life goals; cars, vacations, travel, their own giving plans, etc… Whatever matters to you?

What else? Young people can to what all others with financial confidence are doing. Pay off all their other debt; consumer, car, heloc, mortgage, 2nd home, etc…  Increase the emergency/opportunity fund balance for the unknown future opportunities. Add to a new car fund—deciding to pay cash instead of finance their next new(er) car. Give to their charity of choice, prepay taxes, enjoy a bit, splurge on the giver. Add to your investment account and invest for your future retirement. Spend it while simultaneously bumping up your retirement plan contributions. Do those one time purchases like house cleaning or organizing. The choices are endless. What matter to you?

But, you get the idea. Have a plan for the gift, so when (if) it comes, the decisions are already made to do good to your future self. Your future self will thank you.

You can also expand these thoughts into planning for your next bonus, future raises, commission check, paycheck, etc… The application of these money principles are endless. Isn’t this wonderful?

Do good, Dan