Many people dream about what they would buy or where they might travel if they were to encounter a large sum of money, whether that be from winning the lottery, being written into the will of a long-lost relative, or making some good investments in the stock market. However, there can be some negatives that come along with newfound wealth if you do not plan properly. Here are some things to consider if you get a large sum of money.
How the Cash Would Be Best Used
It can be tempting to take your new funds and go on an extravagant vacation or purchase your dream home. However, it is prudent to think about how that money would be best used, and then take any leftover money to spend as you wish. Some good ideas include:
- Using some of the money to start an emergency fund
- Paying off student, medical, or credit card debt
- Investing it in something like the stock market or OKX crypto exchange
Although it is not necessarily fun or glamorous to think about, reducing your personal debt levels can do wonders for your stress and mental health. Consider putting some of your newfound cash into lowering your debt or paying off your home or car.
What Taxes You Owe
Depending on how much money you receive and how you receive the funds, the amount of taxes that you owe might change drastically. In addition, there will likely be more paperwork involved, at least the first time you file taxes after receiving the money. If taxes are not your strength, consider hiring a tax accountant or attorney to help you figure things out. This will be an additional expense, but it is well worth it to keep you out of legal trouble or just to have greater peace of mind surrounding filing taxes.
Who To Tell
Depending on what state you reside in, lottery winners sometimes cannot be kept anonymous. However, if your cash comes with anonymity, you will have to decide which friends and relatives, if any, you will tell about your new wealth. This can be tricky because sometimes feelings such as jealousy and resentment come up when one person suddenly has a lot more money. Consider carefully who you tell and your reasons for doing so. While you do not owe anyone anything, it can feel nice to give close friends and relatives a small gift as a token of your appreciation and friendship.
What To Do Differently
It is generally advisable not to make any drastic changes in your life right after coming into a large amount of money. However, it might be necessary to make some small adjustments, whether permanent or temporary. For example, if you win a large sum in the lottery and the local newspaper publishes your name as the winner, it might be wise to install some extra security around your home.
If you are lucky enough to come into some unexpected funds, be thoughtful about the money so you can enjoy it for years to come.