In the last column, I promised that this time we would look at two things: first, whether you should pay off your mortgage if you receive a windfall — like an inheritance, a legal settlement, or a win at Powerball or at the casino. Also, things that you might consider doing with an income tax refund, a bonus or a raise.

But, first, all of the current talk about increased automation, computerization and robotics hit home recently, when I heard a conversation on the radio about developing robots to do the work of judges. All I could see was Watson, the IBM computer, sitting behind the bench in a wood-paneled courtroom, listening to legal arguments, and then making decisions. I wondered what voice would be used – James Earl Jones? However, I felt better as the conversation continued, because it became clear that judges were not about to be replaced any time soon; but that in the future, computers would become more important in chambers, doing legal research, evaluating evidence, and performing a number of other legal tasks, often performed now by law clerks.

As Boston Consulting Group senior partner Larry Kamener said recently, "I don't believe that robots will replace judges. However, the combination of a judge's expertise and a computer's ability to process and analyse information can let judges make better decisions."

That being said, it is clear that anyone who is at the beginning of their careers — as well as counsellors, teachers, parents and grandparents of young people in K-12, who will be advising them about their futures — really needs to pay attention to the fast-moving developments in artificial intelligence. They are no doubt going to affect many careers. In some cases, they will change careers significantly, in other cases, they may eliminate them. The financial futures of many of our youth may be on the line, as policy makers address these issues, so let’s keep our eyes and ears open, and stay engaged. From everything that I have read and heard, it will be about them being creative and empathetic, and being able to answer the questions and solve the problems that can’t be Googled.

As for what you should consider doing with your income tax refund, a bonus or a raise, my top two suggestions should not surprise you. First, create or increase an emergency savings account, which should also include savings for those anticipated expenses that you have identified for the upcoming year. Second, pay off any high-interest debt, especially credit card debt but also high-interest car loan or private student loan debt.

Beyond that, consider using them for an important “need” that you may have put off, like new eyeglasses, or a medical or dental procedure. Then, review your long-term financial plan, and consider where you could use all, or at least a part, of them to meet your stated goals earlier, like funding a 529 plan for a child or grandchild’s education.

Also, when it comes to a bonus or a raise that you worked hard to earn, don’t hesitate to spend some of it to do or buy something fun, as a reward.

By the way, we will use our income tax refund, after paying the preparation fees, to more fully fund our real estate tax and homeowners insurance savings account, now that we have paid off our mortgage, and have to pay those expenses directly.

As for whether you should pay off your mortgage with a substantial inheritance, legal settlement, winnings or other windfall, as with everything else financial, it depends upon your individual circumstances. For example, if you take the standard deduction when you do your income taxes, the real estate taxes and mortgage interest deductions — which can keep some homeowners in a lower tax bracket — won’t mean anything to you.

Another consideration is whether you believe that you can earn more, after taxes, investing the funds over the remaining term of the mortgage. That determination can depend on a variety of factors, such as your tolerance for risk, whether you own a small business that you can invest the funds in and earn a greater return, and other similar investment considerations.


In addition, before you commit those funds to paying off your mortgage, you need to consider whether you otherwise have all of the liquidity that you will reasonably need in the future.

In any event, if you receive that windfall, it is time to sit down with your financial advisor, look at all of your options, review the status of your overall financial plan, do the math, and make the best possible decision for your circumstances. It’s a good problem to have.

John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program. Find his previous columns at