There is no formula for instant wealth – but for some, it can become a reality overnight and, if not managed correctly, this dream can easily turn into a nightmare.
If you happen to inherit an astronomical sum, receive a massive bonus, or fortuitously sell a property for a lot more than you paid for it, then follow these useful tips that we found in an article published by Fin24 that will help you to successfully handle a financial windfall.
1. Don’t spend it all at once
The temptation for many people who come into a large sum of money is to blow lots of it in one go. While a bit of indulgence shouldn’t hurt, overspending could result in a lot of wastage and could cost you dearly in the long run. So, instead of splashing cash aimlessly, take a moment to consider carefully how the money could be better spent or invested for, and in, your future.
2. Pay off your debts
First things first, clear off any outstanding debts. Give yourself a clean slate and what Ester Ochse, the channel head for FNB Advisory, calls “the opportunity to live a debt-free life”. And once you are blessed with not having any debt hanging over your head, try to keep it that way to give yourself more freedom and options.
3. Don’t just quit
Coming into an unexpected sum may make you consider throwing in the towel at work, but if you don’t invest your money wisely and plan properly, losing your regular income and benefits could create limitations.
4. Save for a rainy day
You never know what could happen, so it’s important to always have enough money saved for emergencies.This would involve assessing your new lifestyle and ensuring that you always have at least six months of living expenses kept aside in the event of any misfortunes.
5. Seek financial advice
Ultimately, receiving a windfall will change your financial trajectory. You’ll need to review your investment objectives, consider estate planning, and re-evaluate your risk appetite. Don’t hesitate to arrange a meeting to assess any new short-term or long-term goals, and ensure that your investments are in line with your financial situation.
If you do find the pot of gold at the end of the rainbow, it’s important to take the correct measures to protect it and ensure it lasts. Careful financial decisions from the offset could save you a lot of unnecessary trouble in the future, so be sure to ask advice and discuss any change in fortune.