How to Properly Handle a Lot of Money

So, you’ve hit the jackpot!

Maybe your second-cousin-twice-removed or your 120-year-old Aunt has died, leaving you a hefty inheritance. Or, a dear loved one has sadly passed and in lieu of their actual presence, you’re left with nothing but flashy possessions and a healthy bank account.

If you’re luckier, you may have purchased the winning lotto ticket, won some serious cash on a game show or called up the radio station right in time to nab that 50 grand giveaway.

Regardless of the circumstances, you’ve suddenly found your pockets lined with every colour of the Note Printing Australia factory, and you’re stoked!

This is around about the time most people hit up their local real estate agent, travel agent or car dealership. You might up the limit on your credit card only to max it out ten-minutes later on a whirlwind shopping spree, or be a good Samaritan and give generously to your favourite charity.

There’s a million-and-one different ways you can blow your cash in the blink of an eye, and only a handful of responsible ways to keep it.


It’s true, spending a lot of money is way easy.


If you don’t want your 15-minutes of wealth to disappear as quickly as it appeared, reading our mini listicle could save you a fortune – literally!

Yoink!


The rule of thirds


Essentially, you should instantly divide your money three ways, or into three pockets, so to speak.

The first pocket is all about getting yourself out of shit. Do you have a mortgage, any substantial debt, a baby on the way? If yes, take the first third and pay off/prepare for these debts.

Pocket two is all about the future. Maybe your old car is about to cark it, your retirement fund is a little dry or you and your partner are thinking about buying a house and getting married. Pocket two should be put aside for your future self.

Pocket three is all about fun. No matter how hard you try, if you suddenly come into a substantial amount of money it’s almost impossible to not blow some of it on the things you would love to do or buy. Once you’ve paid off your debts and planned for the future, it’s time to visit Europe or buy that $5,000 bottle of wine you’ve always to try.

Let your hair down and have a little fun, you deserve it!


Watch your savings grow


Another handy way to utilise your newfound cash flow is to save it. You don’t have to stow the whole lot away in a high-interest bank account or investment, but you should definitely stash at least some of it.

The amount you save/invest will depend on your personal financial situation and how much you have. Say you win 200 big ones, but have a $150,000 left on your mortgage. Pay off your mortgage first, and then split the rest. You can easily stow away $25,000 without taking away the fun that comes hand-in-hand with free money.

The great thing about investing or chucking your money in a long-term account is that as time passes by, you’ll not only stop missing your beautiful crisp money, you’ll also start earning more of it without having to lift a finger.


Proceed with caution


No matter what you do, avoid the impulse buy. Last-minute, un-planned decisions are the plague of the finance world. Sure, that $200,000 car looks great, but will that two-seater convertible actually fit your uni books and gym bag? It definitely isn’t any good for a road trip with your mates or further down the track, a baby seat!

If you see something and immediately think, OMG I want that! Wait at least 48-hours, think about it practically and then decide if it’s something you actually want/need.

Also, rethink anything short-term. A holiday is fine because it leaves you with lasting memories, but blowing all of your money at the craps table or a big night out is probably something you’ll regret in the morning.


Long-term planning


Our last piece of advice is to spend within your means. A couple hundred grand sounds like a lot, but it won’t last forever. Using your new money as a down payment on a million-dollar property is not a good idea.

If you earn a mediocre wage once that money is spent, you probably won’t be able to afford the upkeep on a pricey residence and before you know it, the bank is foreclosing on you.

If you’re lucky enough to win a cool 10-million, you’re probably fine, but if you can’t maintain your new lifestyle when the money inevitably runs out, think twice about that grand new purchase.

From rags to riches – don’t let your miracle wealth become your downfall.