An expected or unexpected pay, inherited property, sale of property, a lawsuit settlement or a lucky lottery ticket, in any case before being extravagant any individual should keep in mind that money can create a world of problems. The lucky individual might end up in worse financial condition than they were before winning the jackpot. It can give a false sense of financial security, leading you to take up irresponsible habits you would never consider doing earlier. Eventually, those can turn into pricey habits and an absurd lifestyle. It’s crucial is to have a solid plan from the start.
The very first thing financial advisors suggest is to keep calm for a few months once you receive a huge amount of money, this would give the individual to think and analyze situations to understand what if the first step to be taken. A financial windfall brings with it an overwhelming tide of emotions which has a greater quotient of making us lose everything we have if not properly planned. Numerous long lost dreams might come back; far off relatives might show up all of a sudden with an emotional pitiful story, fraud financial advisers may come up with deceiving schemes, it is important that the individual should not disclose his fortune to anyone except his immediate family and trustworthy financial advisers. Before planning any major purchases or stepping forward to fulfilling dreams, individual should keep in mind the law of diminishing marginal utility. The law is a calculation for the measurement of happiness or satisfaction an individual has with minimum or surplus resources. For example, an individual’s satisfaction after eating the first piece of a candy will always be greater than satisfaction followed by eating further more candies. So, money can’t always be associated with happiness.
Step by step things to do after receiving a financial windfall
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Pay Off any High-Interest Debt
Before starting to splurge extravagantly, it’s better to pay off debts like credit cards, mortgages and personal loans. Freeing yourself from high-interest debt will save significant interest amount. According to financial advisers, the savings achieved by settling debts can’t be beaten by the returns generated from many investments.
Planning for worst case scenarios
Invest in primary and most important necessities like a house, car or health alignments if any, insurance and retirement. Investing in any worthy education is better because job security is worth a lot of money in the long run.
Multiplying the amount
Now that all the primary requirements are met, the individual should focus on multiplying the money through substantial business investments rather than gambling and quick money earning techniques.
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