I won a sweepstakes and will be getting USD 50k...it is verified that it is legitimate although no taxes have been taken out so I will have to claim this income on my taxes next year, they will send a 1099. I do have a significant amount of student loans (a little greater than 50k) & I am currently in school now (through a scholarship) finishing my degree so I am not paying towards the principal right now only small interest payments. I also have credit card debt (under 10k) and a car loan (around 15k)—recently my income increased, for the last 3 years I made around $25.00/hour and prior to that I made around $13.00/hour, which is how I incurred the credit card debt. I am wondering if it would be wise to invest this money into a business or real estate after paying off my credit card debt.

I am 30 years old, live in Indiana, a single parent with three children, I work full time, and go to school online. I make a decent amount of money now US$50.00/hr & work 36 hours a week, I am renting US$1040/month, plus have credit cards and car payment (5.5% interest). I have a 401(k) with about $15,000.00 in it and a regular savings account with around $2,000.00 in it. I just recently started making $50.00 an hour & I realize with my job earnings I could get out of debt in a fairly reasonable amount of time depending on how aggressive I pay. I also know the USD 50k won't get me out of debt completely either, so I thought paying the high interest credit cards off and then investing the remainder into starting a business or a property might be the best idea to create another stream of income...(?) I had no intention of quitting my full time job. I just wanted to possibly gain insight to other options outside of throwing all of the money to debt or wasting it all.

  • 44
    Please add a country code.
    – RonJohn
    Commented Jul 13, 2019 at 5:54
  • 11
    $50/hr doesn't mean much without saying how many hours you work.
    – chepner
    Commented Jul 13, 2019 at 16:05
  • 85
    Please don’t take this the wrong way: scams are much more common than sweepstakes. Take care to be sure you’ve won something legitimate before you go spending your windfall.
    – thehole
    Commented Jul 13, 2019 at 19:23
  • 12
    You might want to replace your hourly income rate with your yearly income rate. We might do the conversion for you if we could assume that you worked full-time or something, but given that you're a student and a single-parent of 3, it's unclear if that's necessarily the case.
    – Nat
    Commented Jul 14, 2019 at 0:21
  • 24
    @thehole : especially if it's a sweepstakes you don't remember entering, and they first need you to pay some fee before getting your reward. Then it's 100% sure it's a scam.
    – vsz
    Commented Jul 14, 2019 at 9:59

10 Answers 10


EDITED after OP added more details.

no taxes have been taken out yet.

24% will probably be withheld, taking you down to 38K.

The organization that ran the sweepstakes must withhold 24%. It's the law, and of course you have to claim it on your tax return, whether or not they withhold anything. Because they'll withhold, they'll send you a W-2G saying how much they withheld, and you'll put that + the $50K in your tax return.

But if for some reason they don't withhold 24%, you should "self-withhold". And pay quarterly taxes, so you don't get fined by the IRS.

so I thought paying the high interest credit cards off

The stunningly high interest rate on credit card debt lights your hair on fire, and dousing the fire on your head is naturally of prime importance. Thus, yes, paying that off it the top priority.

and then investing the remainder into starting a business

What business?

or a property

Do you have the will to become a landlord, and all the headaches (taxes, repairs, maintenance, trying to evict unruly tenants that know how to game the system, etc.) that come along with it? (Remember that hiring a property manager cuts into your profit.)

might be the best idea to create another stream of income that can then be used to get out of debt...?

Let me play devil's advocate:

  • Do you have the entrepreneurial spirit and an existing solid plan, or does it just sound cool and inspirational?
  • Since most small businesses fail, what will you do when you fail and wind up in even deeper debt?

IMO, you should:

  1. pay off the credit card debt,
  2. Add another $1,000 to your emergency fund,
  3. EDIT from @Falco comment which I like: Have some fun with a few thousand dollars.
  4. pay off as much of the student loan debt as possible (being careful about prepayment penalties, etc.) use the rest for tuition so that you don't accumulate more student loan debt,
  5. add the monthly money you were paying towards the credit card debt to your student loan debt payments auto loan payments, and
  6. learn where your money goes, so that you don't add any more debt,
  7. build up your e-fund to higher levels.
  • 10
    Regardless of what is/isn't withheld you need to plan for the taxes so you don't end up in a bad spot come April (assuming US), likely 24% bracket for federal and who knows for state. Also, $1,000 is pretty lean for an emergency fund when you are a single parent with 3 kids, I'd up that by a bit but otherwise would follow this answer. $50/hour and $1050/month for rent suggests you should be able to get out of debt pretty quickly once you make it a high priority.
    – Hart CO
    Commented Jul 13, 2019 at 15:49
  • 27
    I'd also add - as a fellow single parent - you have ZERO time to invest in property management and ZERO time to deal with risks of a startup business. Keep your $50/hr job and get out of debt with everything you have. Time is more valuable than money (you make enough to get by) when you are a single parent.
    – Paul
    Commented Jul 15, 2019 at 13:13
  • 6
    $38K isn't great for starting most businesses or investing in a property. There are cheaper properties but its a lot of work even on a cheap property. Commented Jul 15, 2019 at 14:47
  • 5
    I'd suggest that the OP uses the "few thousand dollars" to get something that isn't a money pit. For example: motorcycles are fun and have a huge cool factor, however they can easily suck down hundreds and thousands of dollars a year in repairs and "upgrades". Yes, the OP needs to have some fun, but not at the expense of future money, since that could get them back to where they are now, or worse. Commented Jul 15, 2019 at 20:18
  • 6
    @computercarguy right. A vacation, some spa treatments, new clothes, new computer, etc.
    – RonJohn
    Commented Jul 16, 2019 at 7:24

You make $50/hr and are in debt? This is a serious problem!

The $50K is a distraction.

This is what I'd do:

  1. Pay off any high-interest debts (say 7% and above) up to ~$40k (saving some for taxes, ignore if they're already withheld).
  2. Stick remainder in a High Yield savings account (e.g. Ally) and forget about it.
  3. Discontinue use of credit cards, if you're carrying a balance then they're not safe for you to use.
  4. Take this opportunity to learn about budgeting and money management.
  • 34
    In many parts of the US a single parent of 3 making $100,000/year is not at all wealthy.
    – arp
    Commented Jul 14, 2019 at 1:43
  • 4
    @arp judging by the rent payment, I'm assuming she's doing okay if working full time. The stated rent would cost about a 1/10th of that.
    – kuhl
    Commented Jul 14, 2019 at 3:11
  • 14
    @arp agreed. However, my answer applies to that situation as well. If you're struggling on $100k/year - like getting into credit card debt level struggling - you need PF skills, not $50k. One can change your entire life for the better, the other can dig you into a deeper hole than when you started.
    – NPSF3000
    Commented Jul 14, 2019 at 15:59
  • 1
    I don't know about other places, but where I live, with a full-time job at 50/hour, you should be withholding something like 15k for end of the year taxes, at least.
    – Patrick M
    Commented Jul 14, 2019 at 16:51
  • 2
    @Joshua keep in mind that the OP's debt includes high interest credit card debt, is a student, and is thinking of 'starting a business' to 'get out of debt'. Context matters.
    – NPSF3000
    Commented Jul 16, 2019 at 2:27

Not sure if I've read properly, but 50k is not all that much, even moreso as existing debt is involved (was it maybe 500k, and I misread?). Insofar, the mere idea "Should I buy property or start a business or something" makes me go "WTF?!", sorry.

Debt, especially debt with high interest rates (credit cards?) eats away your assets, and it does that constantly, every month. So, the only reasonable thing to do when one has debt and useless money lying around is to eliminate the debt. Debt gone, regular drain of money gone.

Unless of course, you have a secret master plan which will, without risk, allow you to gain higher interest than the one you have to pay for your credit cards. If you have such a plan, please tell me! Count me in.

Interest, generally, gets better the higher the risk. Worded differently, the only ones who will pay interesting interest are those whom you actually don't want to give your money (in fear you will not get it back). They wouldn't pay that interest if they hadn't to. The same goes for investments of virtually every kind. No risk, no revenue.

So, making a better bargain than what you have to pay to your bank is... hard, and risky. Why do that if you can eliminate the steady drain of money by paying off debt? Not losing money every month is, finally, the same as gaining money every month. Only just, no risk.

Also, 50k minus tax, minus small change, is, well, not precisely nothing, but in terms of "let's buy property"... I mean, what do you expect to buy from that? Maybe you can get some desolate shack in some desolate place somewhere, but something that has a fair chance of actually being worth its money and bringing back significant money? Not sure. It depends on where you live, but where I live, that would be a ridiculous idea.
Unless of course, you're willing to take up significantly more debt, which will mean even more monthly expenses. Sure, if the property is rented, you can cover these expenses from the rent. But if you fail to find a tenant, or if you tenant turns out being a hobo who doesn't pay, well, you still have to pay the interest, or the bank will just take away your property. There we go again, risk.

  • 12
    DV for imo unnecessary (and distracting) snark in the answer. Also, say there’s $40k left, that’s a down payment on a $200k house, which could plausibly end up around the same $1040/mo housing expenditure, but now towards a mortgage instead of rent.
    – thehole
    Commented Jul 13, 2019 at 19:35
  • 5
    Good luck getting a mortgage, especially at a recent rate, when you're already in massive debt. Commented Jul 14, 2019 at 16:46
  • 1
    @EricDuminil yep, that’s why I didn’t make it an answer. I was just pointing out 2 things: 200k is enough to get you plenty of house in lots of places, it wouldn’t have to be a desolate shack in a desolate place; and, there is some ambiguity in OP’s post about whether they are considering an income property or not.
    – thehole
    Commented Jul 15, 2019 at 14:11
  • 3
    @thehole: Yes, only just 50k and 200k is not the same. 200k means +150k debt. If you are already in significant debt, your interest rates for that loan (if you get one) will be a nightmare. The worse your credibility, the higher the rates! So that's the exact opposite of what one would want to do, it adds to the monthly-being-milked-for-debt. Also, that doesn't even take tax into consideration...
    – Damon
    Commented Jul 15, 2019 at 14:25
  • 1
    @Damon there’s a lot of detail missing from OP to make any recommendation more helpful than vague rules of thumb. I’m not advocating for OP to buy a house, I’m saying if they did, it wouldn’t necessarily be a hovel like this answer states. I’ll also say if homeownership is a goal, this windfall is a shortcut past clearing yourself of debt to acquire a down payment, so OP could have a house tomorrow instead of in 35 years when they’ve paid off the loans and saved enough again. And even at high interest, OP should be able to trade rent for PITI in a lateral move.
    – thehole
    Commented Jul 15, 2019 at 21:50

Starting a business isn't really a viable option for getting out of debt, unless you really know the ins and outs of whatever business you'd get into. Most new businesses fail. Even the successful ones will probably require a long slog before turning the corner to profitability.

Your first priority*, of course, is to pay off the high-interest credit card debt. After that, you should look at putting some money in an IRA, just to ease the tax burden.

Since you say you're in school, I'm assuming you're not yet making payments on the student loans. If you are, look at the interest rates, and how they compare with long-term investment returns.

But in general, you should invest the rest, other than a couple of thousand kept as an emergency fund. Depending on how likely you are to need the money in the near future, your choices range between index funds (if you likely won't need it soon) and stable value funds.

*After Uncle Sam takes his cut. That might be taken out by the people who run the sweepstakes. If not, you need to look into estimated taxes.

  • 1
    'Invest' means different things to different people. Might I assume you're talking about an index fund?
    – jpaugh
    Commented Jul 14, 2019 at 0:17
  • 1
    @jpaugh: An index fund is one option (and probably the one I'd choose), but there are others, such as the stable value funds I suggested: investopedia.com/terms/s/stable-value-fund.asp And of course there are intermediate risk funds that keep a large fraction of their assetes in bonds &c, plus market sector funds of all sorts. The point is that with something under $50K, it simply doesn't pay to do your own investing.
    – jamesqf
    Commented Jul 14, 2019 at 16:50

I think it's worth emphasizing @thehole's excellent comment in an answer that will remain... Scams are much more common than actual sweepstakes! Be certain you're actually winning something for real before spending/counting on any of it. The consumer bureau of the state this sweepstake comes from should be of some help in verifying their legitimacy.

If you get any sort of request for money in order to collect your winnings, please heed that big red flag. A legitimate prize will not ask for taxes, handling, good faith deposit, any sort of fee! Or possibly even worse, details of your bank account (including password) so they can do an automatic deposit.. Talk to your local police department, check out the helpful FBI Internet fraud resources https://www.fbi.gov/scams-and-safety/common-fraud-schemes/internet-fraud don't just fall for something because you need the money


Overall I like Damon's answer, but I'd like to suggest an option taking it further. Absolutely spend all of the money paying off debt.

You have a choice between paying off high-interest-rate unsecured debt that can be discharged in bankruptcy, and low-interest-rate debt that can't. From a numbers perspective, the credit card debt is the better choice to pay off, and you'd only choose the student loans if you think you have a significant risk of needing to exercise bankruptcy rights.

However, in your case, you're considering blowing $50k on gambling (which is what "start a business or buy property" is when you already have that much debt and not much money relative to what it takes to start a business). This suggests a level of financial unawareness and irrational risk-taking whereby I'd seriously consider getting rid of as much of the student debt as possible, which can't be eliminated in bankruptcy, as the priority.


Pay off loans, highest interest rate ones first.

And get a plan in place, a SERIOUS plan, to reduce spending and get rid of the other loans.

Analyse what all you're spending your income on, and cut it down to the bare basics, using anything left over after that to pay off the rest of your loans.

When you're done with that, put half of what you have left over into savings accounts and have some fun with the rest (or use it as discretionary spending for unforeseen expenses).

Investing money, buying property, things like that are NOT what you should ever consider if you've loans outstanding.


First pay off any debt you have.

Find a financial advisor and put it in an index fund that has decent growth and don't touch it until retirement. Some funds can get in the range of 8 to 10% with minimal fees. Lets suppose you put down 30K in a fund: 8% per year (average) would get you 200K in 25 years, and a fund with 10% would get you 325K. This is with no contributions.

I have found that there is no equal with the time value of money, while I don't have much now, I hope to in the future.


I agree with most -- perhaps all -- of the advice already given, but one point has not been raised, by either the OP or any of the answers.

What are your career prospects? You have just gone from $25/hour to $50/hour -- a handsome raise. You must have done a lot of things right, from the point of view of your employer. If you concentrate on your current career, what do you see happening? Obviously, you are unlikely to get another 100% raise soon, but it is also unlikely that you have hit an indefinite plateau at $100,000 per year.

My advice, in addition to paying off the high-interest loans and allowing yourself a bit of fun, is to work hard at your current career instead of diluting your efforts with a start-up business or real estate. The only thing that might change that advice is if you already know a lot about the business you are contemplating and also about running a business. But that doesn't seem to be the case, from reading your question.


Typically what I would do is pay down quite a bit of the debt with half of the windfall, so 25-30K immediately used on the debt.

Then use the remaining amount to just extend my runway a bit more, amplifying the monthly payments I make on the debt. In the US I can extend my tax payment due date till October of the following year, giving a max of 20 months to figure something out.

Most of my debt would be for non-consumptive purchases, so business spending, therefore the interest is also deductible. There is no way for an outside observer to differentiate between irresponsible debt and a calculated risk that involves debt, invalidating many of the answers here. Deductible interest payments completely changes the calculus for what needs to be done, in what order.

For example, if you used all of the money on paying as much of the debt as you can, just to "pay off higher interest debt first", now you are in debt to the government for taxes, and you still have debt incurring interest. This is a worse situation than the one you were in before. On the contrary, if you "extend and pretend", where you extend the real due date of social and reputation problems associated with high debt and potential default, while pretending everything is going to be okay, you get the benefits of: deducting so much interest (if applicable) that there is no tax on the winnings, having a potentially higher salary from your career growth over time letting you pay it off faster anyway, and maintaining your relationships with lenders.

With some of the debt paid down, you could also be eligible for additional credit that would allow refinancing to lower interest debt, and also lowering your utilization, increasing your social standing.

  • 1
    Extend your runway? Also, "they" will almost certainly withhold 20%, so "now you are in debt to the government for taxes" is a non-factor.
    – RonJohn
    Commented Jul 14, 2019 at 21:18
  • "if applicable" is the right term on CC debt, and... it's not applicable.
    – RonJohn
    Commented Jul 14, 2019 at 21:19
  • @RonJohn why not applicable? you can deduct interest on business purchases on a credit card even if you co-mingled personal and business. Its up to OP to tell us whether that is applicable or not. They are clearly entrepreneurial, and with their high hourly wage are probably a contractor.
    – CQM
    Commented Jul 14, 2019 at 21:26
  • 1
    @RonJohn How does that make any of this inaccurate, you didn't answer my question about why is this not applicable. CC debt has nothing to do with whether my answer is accurate or not. OP, She, has to tell us whether its deductible interest payments and that changes the whole calculus on whether its best to pay down existing CC debt now or create a more favorable situation as the one described
    – CQM
    Commented Jul 15, 2019 at 4:04
  • 2
    Since taxes are a debt that the government mandates be withheld by the sweepstakes holder, "now you are in debt to the government for taxes" is moot. It's factually incorrect.
    – RonJohn
    Commented Jul 15, 2019 at 9:02

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