Published on November 21st, 2013 | by Pete1
5 Smart Ways to Spend a Financial Windfall
It is a well noted fact that the majority of recipients of a financial windfall run out of money within a few years. It is very tempting to splurge with the sudden funds you have available, particularly for people not used to dealing with large sums of money. At first it seems like you could never waste that amount of money, but it can happen very quickly. It is important to do some very solid planning to ensure your money will last and will earn you more money in the future. If you are not experienced with investments it is a very sound idea to engage an expert. Companies like Meredon Consulting have a good reputation and can offer you a range of strategies to help give you a return on your money.
Have a Splurge
Give yourself permission to go on a spending spree, but be deliberate about it. If you allow yourself to indulge you will get your spending satisfaction out of the way and then you can get on with the job of planning how to invest the balance. Decide ahead of time how much you will spend. Perhaps it is 2% of the total.
Don’t Quit Your Job
Many recipients of a windfall fall into this trap. It takes a lot of investments to replace your income so don’t be hasty about quitting your job. Calculate what you need to live on and make sure your investments will cover it. You will need to invest over $1million to replace a $50,000 annual income. Don’t be hasty. Think before you act!
Pay Your Tax
Many windfalls are not tax free. You need to get advice on this and pay your taxes up front. Don’t spend up big and then have not enough money to pay your taxes or you will wind up having to sell off assets to do so. Find out how much you owe and pay it. Also be aware of what your annual tax bill will look like and make plans to cover it or work out ways to offset it.
Talk to the Experts
If you are not accustomed to dealing with large sums of money you need to get good advice and fast. You should seek the services of a good accountant and a financial planner. You may also need legal advice and a good insurance broker. Choose your team wisely. Seek advice from associates and word of mouth recommendations. Be very clear about the fees they are charging. Be wary of anyone offering get rich quick schemes.
Take Your Time
People who have a financial windfall often treat the money differently to those that have earned it; easy come, easy go. It has been proven that they are more likely to regret the way they use their money. Wait six months to one year before you decide what to do with your new found assets. Put it in the bank and leave it there until you have a clear and well planned way forward.