You may have been lucky enough to get rich quick by winning big at the races or the lotto, but unfortunately these winnings can often cause more problems than they solve.
Working out what to do with the money is not always as simple as you may think. Many make decisions that will help sustain and even grow their wealth for many years to come, however there are a number of people who unfortunately throw it all away.
So if you ever find yourself in a situation where you have come into a large sum of money, here are five tips to consider.
Take a moment
Once the money is in your possession, you may be tempted to go out on a spending spree. However, the smart thing to do would be to sit back for a moment and really think about your wants and needs.
You may think that you will be a responsible spender and not blow all the money on items they have always wanted to have, but there have been many cases in the past where people who have come into small (or large) fortunes have spent all their money in a matter of months and are now worse off then what they were before winning the money. High risk investment, gambling or impulse buying are just a few examples of irresponsible spending.
So, before you go out on that spending spree, stash the money in a high interest savings account and really look at your options. That way, you could earn even more just in interest until you are ready to spend.
Pay off debt
This may not sound like a very exciting option, but it is possibly one of the best things you can do with the extra money.
Paying off your mortgage, credit cards and other loans will help you save thousands of dollars in interest that you would have been paying for the rest of the loan term. Debt is a significant drain on a person/family’s income and the sooner you can wipe your financial slate clean, the sooner you can start looking into investment opportunities that can help you enjoy the money for many more years to come.
Many people forget about the tax implications that may be associated with the money they have won or received. So, to avoid being stuck with an unexpected tax bill from the government, have a clear understanding of what the tax implications are before you decide to spend the money.
If you are not sure whether you have to pay tax or not, speak with your accountant straight away, before you spend any of the money, and they can give you the right financial advice.
Get financial advice
If you’ve never dealt with large sums of money before, then seeking professional financial advice is high recommended.
You can discuss what things you would like to spend the money on and the financial adviser can create different plans so that you can enjoy the money whilst still being responsible with it. They can also give you advice on investment purchases, such as property, so that you can continue to grow your wealth for many years to come.