Despite bowing out of the Australian Open quarter finals in a straight sets loss to world number six Andy Murray last night, Nick Krygios has plenty of reasons to smile today.
Apart from being the first teenager to make it to the quarter finals of two grand slams since Roger Federer in 2001, and the first Australian man to reach the quarter final of the Aussie Open since Lleyton Hewitt in 2005, he’s also picked up $340,000 in prize money for his efforts (minus the $4,926 fine he copped for hurling obscenities and racquets, of course).
All in all, not a bad outcome for nine day’s work.
While most of us can only dream about coming into that kind of money all at once, there are a few situations in normal life where you could find yourself staring at a big pile of cash, think an inheritance, selling your business, or picking the trifecta on the Melbourne Cup.
But working out what to do with a windfall isn’t always easy, and the last thing you want to do is blow it all on something stupid. So whether it’s five grand or three hundred and forty, here’s how to handle it.
Step 1 – Take care of taxes
Depending on the situation, the taxman may want a piece of your newfound wealth.
If that’s the case, it’s best to pay him first to avoid a whopping great tax bill after you’ve already spent the windfall on other things.
If you’re not sure whether you need to pay tax, an accountant will be able to shine a light on your situation.
If in doubt…
Step 2 – Treat Yo Self
This is important. Unexpected money in the bank will burn a hole in your pocket and the only way to scratch the itch is to, in the words of Tom and Donna, Treat Yo Self.
The trick, though, is to do this in moderation.
It may not seem like it, but it’s actually possible to blow all that cash, just ask Englishman Michael Carroll.
Carroll, the self styled ‘King of the Chavs’, won £9.7 million at the tender age of 19 playing the UK’s National Lottery, then proceeded to blow it all on drugs, gambling and prostitutes until he ended up on government handouts eight years later. He now works in a biscuit factory. Here endeth the lesson.
Three words for you…
Step 3 – Pay off debt
Paying off debt may not be as sexy as buying a new car or a trip to Europe, but it’s one of the smartest things you can do with that extra cash.
For example, paying off a chunk of the mortgage early can save tens of thousands of dollars in interest payments over the life of the loan.
And while many of us have an enduring love affair with credit cards, they’re racking up interest at over 17 per cent, so it’s crazy to leave that debt sitting there.
The sooner the slate is wiped clean, the sooner you can start putting your money to work.
Step 4 – Park the rest for a while
Not in a canary yellow Ferrari like Bernard Tomic, we’re talking about a bank account or a term deposit that you can’t touch for a while.
This will give you some time to think through your options, and hopefully avoid the temptation to make any rash decisions. Like buying a canary yellow Ferrari.
Bernard Tomic popping out to get some milk, Gold Coast, QLD.
Step 5 – Get the professionals involved
If you’ve come into a reasonable chunk of change then it could make sense to get the suits involved.
They’ll ensure that you make the most of the opportunity that you have, and put a plan in place to grow your wealth even more over time.
A financial adviser for investments, insurance and setting financial goals plus an accountant for tax advice should be your first port of call.
If the suit fits…
Step 6 – Be careful who you tell
Finally, remember people do funny things when money is involved.
Think twice about posting a Facebook update about your good fortune, and make sure you trust the people that you do tell.
Main image: Tennis Australia