Many of us dream of the day when we receive a windfall of some sort. Whether it’s a winning lottery ticket, a bequest, a settlement, a bonus, or some other unexpected sum of money a windfall is a wonderful thing. However, there is something about getting money unexpectedly, especially lots of money, that can cause even fiscally responsible people to act in strange and unwise ways.
It will probably come as no surprise that the most common mistake many people make when they come into money is to spend every last dollar of it. It is a very deeply rooted human impulse, but the consequences of giving in to it could leave you worse off than before the extra money came your way. It’s okay to spend some of it, but do not start spending before deciding on a specific amount that you can spend as well as a clear plan for what you will do with the rest of the money.
Another common mistake comes from the good intention of wanting a portion of your newfound fortune to make even more money for you. There is nothing wrong with wanting to invest a portion of your good fortune, in fact it is a wise idea to do so. However, if you are not familiar with how to invest you could make investment decisions that cause you to lose money rather than make money. Even worse, you could fall prey to an investment scam – and there are plenty of those out there. Once you choose an amount that you would like to invest, park it in a FDIC insured savings account or some CDs for a year or two. That way, you can educate yourself about other investments that could have bigger payoffs while your money makes at least a little money sitting in a secure place.
These are just a couple of the perils that could trip you up if you find yourself suddenly on the receiving end of a bunch of money. In order to avoid these and other potential pitfalls (such as the tales of woe from long lost friends and relatives and the unending parade of charitable solicitations), it may be a good idea to keep your good fortune as much of a secret as possible, make a plan for what to do with the money, and stick to that plan.
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