Independent Financial Planning: 3 Solid Tips to Managing Unexpected Money
Perhaps, you won the lottery or inherited a great sum of money from a distant relative. Regardless of how you ended up with a huge lump sum of unexpected money on your hands, the question that you should be most concerned with is: how can you manage that money and make it work for you?
Most financial planners recommend these 3 solid tips.
Create a Rainy Day Fund
You never know when disaster may strike. Making sure that you are financially sound to handle the rainy days ahead is important, especially if you may experience wage loss. Most people tend to underestimate the amount of money that they would need in the event of an emergency. Most financial experts recommend having a minimum of nine month's worth of expenses, or wage, set aside.
With unexpected money coming your way, make sure that you speak with a financial planner regarding whether you can set the money aside in investments or in a savings account that will yield a high interest rate. You want the money that you have set aside to keep up with the inflation rates.
Pay Off High-Interest Debt
Did you know that Australian households are among the most indebted? If you want to finally climb out of the financial abyss of debt, pay off all of your high-interest debts before they accumulate and become an even bigger burden. Credit card bills and car loans tend to come with the highest interest rates. Once you've paid off all of your high-interest debt, you should consider paying off other debts and loans, such as your mortgage. By reducing the amount of interest that you will have to pay in the future, you are essentially freeing up more money for yourself and saving.
Invest in Stocks, Mutual Funds, Bonds and More
Depending on the level of risk that you are willing to assume, speak with a financial planner regarding the various investment options that are available. Stocks tend to come with the highest level of risk, but also the highest yield in profit whereas bonds are typically low risk, but low profit. Find an investment portfolio that suits the type of lifestyle or needs that you have, and watch that money grow with time.
Don't Spend All of the Money at Once
Most people that receive unexpected money have a tendency to spend it all up at once — splurging on their loved ones or finally taking that vacation that they have always dreamed of; however, you should really use the money to help free yourself from debts, so that you are more financially secure. If you manage the money properly, it will flourish and grow, so that you have much more to enjoy in the future.
For more information, check out companies such as Maddern Financial Advisers.