6 Crucial Tips to Handle a Sudden Financial Windfall
Tuesday, November 11, 2014, 1:00 AM | Leave Comment
How would you feel if you were the next lottery winner? Or perhaps the heir to a million-dollar empire? People may think they can react wisely during a sudden financial windfall, but the mere truth is, they can’t. It can easily get to your head, and from there, it’s not difficult to burn the money in senseless pursuits.
Believe it or not, these cases have happened and continue to happen in society.
Don’t be another statistic by reading these tips on how to ride the emotional roller coaster following a financial windfall.
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Before Doing Anything
Thoughts easily rush to your head on what you can do with your new found wealth. Should you buy a pair of jet skis? Perhaps treat all your friends to a fancy dinner? Buy property on each state in the country? To avoid making any regretful choices later on, take a step back and let your mind clear.
Know how much you’re worth. Oftentimes, people who get hit with a financial windfall overestimate the fortune. They fail to consider factors that could easily deplete their money, such as taxes. Determine the actual number and establish a budget based from that number. This keeps you from spending too much and too often by establishing limits.
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Invest the Money
The rich only remain rich by allocating their capital to investment vehicles that churn out bigger returns every year. You may need to involve your financial adviser when constructing an investment portfolio. They can identify the most profitable strategies that can grow your capital in the fastest and safest way possible.
Try not to reinvest it in lottery tickets or casinos as you’ll likely not be lucky the second time and land a jackpot. Instead, work your way slowly in turning the fortune into a more massive pile. Buy and hold stocks that are undervalued and have potential.
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Train Your Mind
Seeing your bank account change from four digits to six or seven can turn you crazy. Train your mind to handle the pressure and avoid changing your personality just because of the wealth. Keep yourself firmly grounded and realize the opportunities you can do with the money, such as charity.
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Don’t Quit Your Job
This is common, especially for employees who hate their current career. These people often undermine how much savings they will need to retire comfortably and replace the income they just lost. For example, if you make $50,000 annually, you will need to invest at least $1 million just to earn enough returns to supplement your lifestyle.
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Reward Yourself
Don’t be afraid to spend a little for yourself. Treat yourself to a relaxing massage or buy something you really like. It could be anything from a model train to a new pair of shoes. Be cautious though and exercise moderation. You don’t want to spoil yourself with things you don’t really need. Spend at least 2 percent of your acquired wealth on something you’ve always wanted.
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Don’t Be Gullible
Having wealth attracts telemarketers and promoters who advertise their product or service as the best in the market. They throw you true-good-to-be-true sales pitches in hopes of allocating a small chunk of your wealth into their worthless business. You should always consult an independent party, such as a financial adviser, before investing in anything or anyone. If you really feel strong about their offer, take time to research what it’s about before giving your decision.
If you prefer a lump sum of money rather than receive monthly payments, there are various institutions like myLumpsum.com that can settle the payout structure you desire.
Getting a lump sum payment allows you to maximize your investment portfolio and avoid the hassles of waiting tirelessly for payments to come in every month or year.
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