This post may contain affiliate links, allowing us to earn a commission on the products we would recommend to our families and closest friends. You can find more info on our Legal Stuff page.
It is something most of us have dreamed of at some point – winning the lottery, or coming into a substantial amount of money unexpectedly.
It sounds like a dream come true, doesn’t it? Lots of money, to do as you please. Maybe you will splash out on a new house, a top-of-the-range car, jet off for a luxury holiday, and buy those designer shoes that you have always imagined yourself wearing.
But while winning the lottery or having a windfall can be great, it can also bring with its own set of problems. So many people who have found themselves suddenly wealthy have also seen how fast it can disappear if not looked after wisely, often ending up in a worse situation than they were to start with,
Here, we look at some of the steps that you should be taking if you suddenly have a windfall. Read on to find out more.
Consider your goals
Even if we fantasize about it, most people don’t have a comprehensive plan in place for what they’d do if they received a large sum of money.
However, you should make one before you go out and spend your money rashly. Otherwise, it’s all too tempting to get carried away and spend your money on stuff you don’t even need.
Make a list of what you would like to buy or do with the money, including gifts. This could include everything from a vacation to assisting a loved one with the purchasing of a house. Consider not only what you would like to do right now, but also what you would like to do in the future.
It’s easier to make a plan when you have all of the details in front of you, rather than just a few hazy thoughts. With careful money management and wealth management, you will be able to see which goals you can afford now and which goals you may be able to afford in the future. Long-term goals might include retiring early or creating a nest egg to leave behind for your family.
Pay off any debts you have
If you come into some extra cash, paying off your high-interest debts is usually the best option.
By paying off your debts now, you can avoid having to pay interest on the debt later, which accumulates over time. This can save you a lot of money.
Short-term loans, such as overdrafts or credit cards, should be paid off first since they usually have higher interest rates. After you have paid those off, you can focus on paying off other long-term debts like auto loans and student loans.
Low-interest debts like mortgage loans may not be worth paying off early. Why pay off your mortgage loan with a 3.5% interest rate when you can invest the money and get returns of 7-10%?
Organize an emergency fund
Nobody can predict the future, so it’s always a good idea to have a rainy-day fund, no matter how well you manage your finances. It will give you peace of mind should things go wrong.
Despite the fact that cash’s purchasing power is being undermined by inflation, it is always a good idea to have a fund that is readily accessible just in case. As a general rule, it’s a good idea to put money aside for an emergency fund to last you at least three to six months.
Comments (0)