Managing a sudden cash influx
Prioritizing a recent cash influx is an important endeavor that many people will dismiss as not a big deal, whether expected or sudden, and whether it was a contest, gift, or inheritance. After all... (1) It's EXTRA money, (2) It seems like a LOT, (3) It's a HAPPY time so maybe it's time to celebrate, (4) Time to INVEST? And so many other possible frames of mind that at best could cause you to miss important opportunities, and at worst could lead you to basically squander a rare win that may never come again. Here is a list of some mental pitfalls for the average, moderately above average, or lower than average income person to avoid...
(1) The money is LIMITED: There is a tendency to think that the money received can go a longer way than it can. If you fall into this frame of mind you'll see the money evaporate quicker than you think. Depending on your financial situation, your first impulse should be to save for a rainy day. Unless there is an emergency, it is best to continue your life as you did prior to the influx, since this is a one-off deal. Your core income will not increase so spending this influx unwisely won't better your life in the long run. A safe interest bearing vehicle is the best bet. This is not even about retirement, since retirement requires a long term income arrangement. This is about rainy days. And believe me, they ARE coming. This will alleviate any shocks that WILL come your way, and truly help make your life easier.
(2) The dangers of INVESTING and other types of direct money risk-taking: Many people will see a one-off cash influx as an opportunity to engage in risky ventures. While failing can be a powerful teacher in terms of what you should and should not do, it can be very expensive. The first problem is one of experience. In this hyper competitive world, investing is constantly changing, and only a small fraction of participants actually make a profit in the short to medium term. The big players have a massive advantage. Even if you spend money on "courses" and such, actually risking the money on stocks, derivatives, etc. without years of experience and learning will automatically put you on the road to losing all the money. When a one-off influx is gone, it is very hard to replenish on an average income, if it's recovered at all. Instead, some of the money may be spent learning a low risk business or trade where effort and know-how, not capital, is required. That way your core income may rise and hard lessons come cheaply. Success is possible without gambling your money away. Spend cheaply to learn and save the rest for emergencies and crucial spending. This is not to say that investing is completely off limits, especially if a professional firm is employed, it's just not the best way for an inexperienced person that got a one-off payment to spend the cash. It's a one-off and this cannot be emphasized enough. Research and educate yourself on how to make money via expertise, positivity, and effort. Building passive income with know-how rather than large investments is another avenue to research and explore on the cheap.
(3) Celebrating and vacations (and conclusion): Parties, luxury purchases, and lavish vacations are opportunities to waste resources and opportunities. If you must, take vacations and purchase trinkets as cheaply as possible. In conclusion, your regular income simply can't replenish wasteful losses that come from spending an influx of cash, and this will be felt in the long term. And will lead to regret. If you can't reasonably engage in an expenditure or investment using your regular income in the mid to long term, chances are you can't afford to waste your cash influx. Save the vast majority of the money for a rainy day, and if you can afford it, research and spend a little of the money on profitable education on the cheap if you are looking for income opportunities to spend the money on. You don't need to (and must not) risk or gamble all or most of the cash directly to create active and passive income opportunities in the Internet and Information Age.
PAS Media