My father always reminded me that money doesn't grow on trees. For many years, I didn't really understand what he meant by this. However, once I got older, I realised what he was talking about. As a young man, I wasn't very good at managing my finances and this caused some real problems. I got deep into debt. Thankfully, my father took the time to talk to me about the situation I was in. During our conversation, he told me lots of cool things about how I could manage my finances. Since then, I have been much better with money.
There are certain situations where you may receive a large lump sum of money. You may win the lottery, receive an insurance payment, or cash in on your retirement. Regardless of the source, receiving a lot of money at once can be bitter sweet. It may be the dream you've always wanted, but it is also the beginning of a new journey.
There is also the risk of making poor decisions and losing your fortune in the process. So what are among the first steps you should take to ensure that you handle your newly found riches in the best way possible?
Seek out financial advice
The first step you should take is to seek out a financial advisor who can help you manage your money. Financial advisors have the expertise and experience to help you navigate tax issues, investment decisions and other wealth management choices. In cases of lump sum payments, you often have two choices. You can receive the entire amount at once or you can decide to receive it in installments over a period of time.
Lump sum payments will typically involve an upfront payment of tax, which can seem quite high on large payments. However, you have more freedom in terms of making significant investment decisions over time. Partial payments typically provide more stability and you can spread out your tax payment over the duration of the instalments.
Keep up your day job
Just because you have received a lot of money doesn't mean you should suddenly make life-changing decisions. For example, most people are tempted to immediately quit their regular job because they feel that they are financially secure.
It is however important to take your time before you make such big decisions. Because your day job is your regular source of income, try to maintain it for sometime as you explore the next steps that you should follow.
Not everyone has to know
Most people may think that the money you have received is an open pool for them to access as they wish. Friends, family and other acquaintances may interfere with your financial plans and pile pressure on your decision-making. It can also be difficult to tell them off because of the close relationship that you have.
It is a good idea to limit the number of people who know about your newly found fortune until a time when you have a solid plan in place.Share