I give 10% of all my income to charity, including this money. When we are lucky enough to get “extra money,” I try to remember those who are even in more need than us. I believe that you should use your money to help people.
If you have a lot of debt, then paying off a chunk of it can help you climb out of debt sooner and perhaps lower your monthly payments. First, tackle the debt that is the most predatory (or weighing on your mind the most).
Saving $1,000 is a gamechanger. Many Americans do not have that kind of money put away. Do this, and you will be ahead of the game. Your financial future will change.
You may not be able to use this money as earned income, so you cannot put it into accounts where earned income is required (i.e., Roth, etc.), but you can use other money to fund those accounts and “pay yourself back” with the windfall money.