(From the Financial Literacy Blog) – Each year, millions of dollars go unclaimed by Maine residents. Unclaimed property includes money and other financial assets that are considered lost or abandoned by an owner after a specified amount of time has passed with no contact. Examples of unclaimed property include credit union or bank accounts, uncashed checks, life insurance policies, unpaid wages, stocks and dividends, refunds, rebates, safe deposit box contents, and more. The Maine Office of the State Treasurer holds these assets, free of charge, until claimed by the owner or their heir. The State is currently holding over $292,000,000 in unclaimed property, with an average paid claim amount of $585. By going to this website, you can see whether or not there are any assets you can claim. If there are, here are some ways you can maximize your unexpected income:
Pay Off High-Interest Debt
If you suddenly have a little extra money lying around, using it to pay off high-interest debt can save yourself a lot of money down the road. For example, let’s say you’re carrying a balance on a credit card with an 18% interest rate. Unless you allocate the unexpected funds into a savings or investment account that outpaces the 18% interest rate on your credit card, you’ll be losing money in the long run. In addition to high-interest debt often overtaking most savings or investment rates, there are other benefits in using the funds to pay down debt, such as making a positive impact on your credit score. Your credit utilization ratio––the amount of credit you are currently using compared to how much credit is available to you––accounts for a significant portion of your credit score.
Contribute to Your Retirement Accounts
The earlier you start saving for retirement, the better. Traditional retirement accounts are tax-advantaged and putting money toward them sooner than later can lead to increased savings, with compound interest working it’s magic for you. One of the most simple starting points for building retirement savings is to contribute to your employer’s 401(k) plan if one is offered. It is an employer-sponsored, tax-advantaged retirement savings account. Alternatively, you can contribute to an IRA, which is an account set up at a financial institution that allows you to save for retirement with tax-free growth or on a tax-deferred basis. Turning unclaimed property into tax-free retirement contributions will pay dividends (literally and figuratively) as you grow older.
Build Up Your Emergency Fund
If we’ve learned anything over the past couple of years, it’s that the unexpected can happen, and it pays to be ready when it does. A good rule of thumb is to have three to six months of necessary expenses saved away in your emergency fund. However, according to NBC, more than half of Americans don’t have enough saved to cover that time period. In fact, many Americans have no emergency savings at all, with 25% at square one. If you’re part of that 25%, it would be a good idea to put any assets claimed from this website towards an emergency savings account at your local credit union. Whether your car breaks down, you become ill, or you lose your job, having money in a savings account for when those unexpected expenses pop up can give you some peace of mind.
Move It Into a High-Yield Account Quickly
You should consider putting any funds from unclaimed property a high-yield account sooner rather than later. A high-yield account is an account with high interest rates––meaning if left untouched, it will grow at a specified percentage over time. Check with your local credit union to see what accounts they offer.
Invest in Yourself
If you have a skill you’ve always wanted to learn or a skill you need to develop for a job, consider using funds from unclaimed property as a way to invest in your future. Enroll in an online course or sign up for training to continue developing your skillset. If you don’t want or need an additional skillset, investing in yourself can mean taking care of your mental health to prevent burnout. Learn how to play an instrument, use the funds to pick up a new hobby, or save them away in a vacation account.
The largest unclaimed property on the website is $427,000. If you search the website and it happens to be yours, check out our blog on handling sudden wealth.