If you have recently come into some money and you now have some financial gain you are going to be careful what you do with it. It does not matter where the financial windfall came from. It could be that you got lucky and won the lottery or that you had a relative pass away and left you a large sum of money in his or her will. You are going to want to protect this money and not waste it by making dumb mistakes with it. Here are a few of these mistakes you will want to avoid.
When you receive a large amount of money that is completely unexpected it can often send you into a tailspin and even the most responsible and down to earth person can go crazy. Once you receive the money you should not go on a spending spree and spend the money impulsively. What you should to is take a time out and think about what you want to do with the money. Many financial advisers will tell you a good plan is to put your money into a money market account or a CD and let it sit for at least six months before spending it.
A New Car
You should also avoid buying a new car even if you are able to pay cash for it. Anyone who is in the financial business will tell you that you will quickly lose at least twenty five percent of every dollar that is spent on the car. This is because as soon as you drive the car off of the car deal parking lot depreciation sets in and your new car is no longer worth what it was while it was on the parking lot.
Loaning Money To Family And Friends
One of the largest mistakes you can make with your money is to loan money to family and/or friends. A loan of this type always has a chance of never being paid back and once you realize that you bank account balance is becoming smaller you might start to resent the people you loaned money to for not repaying their loans.
Do Not Put It All In Stocks
Stocks can be a great investment if you know what you are doing and you have a well-balanced and diversified portfolio. However if you are a new investor due to the fact that you have recently come into some money you might want to wait and learn the practice of stocks first. And if you are still in doubt it is definitely recommended that you speak with a financial representative.
Paying Off Your Mortgage
You might think that the perfect thing to do with your new money is to pay off your mortgage, which is one of your largest expenses. However you might find that it might not be a very strategic decision. This is because when you have a mortgage you are paying interest on the loan. This interest is also tax deductible so you are losing money every year that your mortgage is paid in full. You will no longer have that deduction to claim.
It is hard to believe that money can cause large problems in your life. When you come into money no matter the reason you should get financial assistance to help you decide what to do with it. It is important to be honest with yourself and learn what the limits are when it comes to spending this money. It is probably in your best interest to hire someone to help you handle the financial aspects.
Image credits to : Brian Goldfarb