If you’ve suddenly received a large sum of money — maybe an inheritance, a bonus or another lump sum — you may be wondering what to do with this new influx of funds.

First, there’s no need to rush into any decisions on how to use the money. If the funds weren’t intended for a specific purpose, think about your financial strategy; it will probably give you some ideas for how to put that money to work.

Regardless of how much money you received or where it came from, a financial windfall can help you achieve your goals and give you more flexibility in the years ahead. Here are some general guidelines when determining what to do with your new sum of money.

Focus on your current financial stability

Whatever your long-term financial goals may be, first make sure you have a strong financial foundation. After all, laying the groundwork can help make achieving your long-term goals possible.

1. Cover your current monthly expenses.

Ensuring you have your monthly expenses covered is the first step toward financial stability. Once you have your cost of living accounted for (such as your mortgage payment, car payments, grocery bills, etc.), you can focus on tackling bigger goals.

2. Top off emergency savings.

The next step in bolstering your financial security is to earmark money for a rainy day. Due to changing needs or the cost of inflation, you may find your current emergency savings is no longer enough. It’s recommended you keep approximately three to six months’ worth of expenses in your savings account. That way, in the event of an unexpected expense or loss of employment, you may avoid needing to dip into your long-term investments to cover your short-term needs.

3. Pay off high-interest debt.

A financial windfall is a great opportunity to pay off any high-interest debt you may have incurred (such as credit card debt). Unlike low-interest, deductible debt (such as student loans and mortgage payments), high-interest, nondeductible debt is likely to cost you more in interest than you can expect to earn on your investments. The table below demonstrates just how expensive not paying off your credit card balance can be.

Benefits of extra payments on a $5000

While you’re in the process of paying off debt, it may be a good time to look at your debt-to-income (DTI) ratio — which is your required monthly payments divided by your gross income — as your DTI ratio can be an accurate predictor of your financial health. The higher the number, the higher the percentage of income being used to pay off debt. If you find your DTI ratio is higher than what’s recommended (35% or below for those with a mortgage and 20% or below for people without a mortgage), you may consider finding ways to reduce your expenses so you can prevent incurring high-interest debt in the future.

Save for the future

Once your present financial needs are planned out, you can now focus on saving for the future.

4. Save for retirement.

No matter where you are on your retirement journey, it’s almost always a good idea to contribute more to your retirement accounts. If you’re an early investor, you have the benefit of having time on your side. Even if it’s a modest amount, contributing to your retirement accounts early in your career can help yield big results. The table below illustrates how the earlier you start contributing to your retirement portfolio, the more funds you would have available during retirement.

Cost of waiting Source: Edward Jones estimates. Assumes investing $700 per month with a 6% annual return. This hypothetical example is for illustrative purposes only and does not reflect the performance of a specific investment. Values rounded to the nearest $5,000

If you’ve been investing for a while or are close to retiring, you may want to max out your IRA contributions for the year. If you earn above the maximum income threshold to contribute to a Roth IRA, you can consider a backdoor Roth IRA or a mega backdoor Roth IRA, which allows you to increase your tax-free retirement contributions beyond the contribution limit.

5. Save for short-term goals.

Once your retirement portfolio is on track to fund your unique retirement needs, you can focus on more short-term goals such as a down payment for a house or car, saving for a child’s higher education or taking that dream vacation. Whatever your short-term financial goals may be, it’s important to make sure you’re not sacrificing your financial stability.

How Edward Jones can help

When making these decisions, you may want to enlist some help. For example, an inheritance of an IRA could come with tax consequences, so you might need to consult with a tax professional. And, as always, your Edward Jones financial advisor can help you protect your newfound funds and integrate them into your overall financial strategy.