By: Giovanni Zaburoni
There are plenty of stories about athletes who signed multi-million dollar deals going broke within a few years. Even lottery winners have a tough time managing their new found wealth. Financial literacy is not something you are born with. Someone has to teach you how to manage your money and if you don’t come from a wealthy family who has learned to manage money properly for generations, there may be no one around you to show you how to make your money work for you. The initial excitement of getting that first big check can make you feel like money is no object and you can do and buy anything, but don’t fall for that trap. Money goes pretty quickly and unless you put a few measures in place to protect it, going broke will be in your immediate future.
According to The Network Journal, there are a few important tips that can help people manage their wealth. Getting an emergency fund in place is very important. Life is not predictable which means anything could happen at any time. It’s important to have a savings account and you should have enough money in it to cover up to six months worth of living expenses just in case you fall on hard times.
Instead of spending when you get that first big check, you should start paying off any debts you may have. School loans and credit cards should be the first to get paid off, because they can take a toll on your credit for years. You may be tempted to buy yourself a huge house or buy your mother the house of her dreams, and you can certainly do that at some point but be smart about it. There are other expenses that come with owning a home like property taxes, maintenance, and utility bills that will slowly chip away at the money in your wallet. Make sure you have a steady stream of income before buying that big home.
Making smart investments is key to maintaining wealth. Think about opening an individual retirement account or a brokerage account. If you plan on investing in private business opportunities, know how much you can allocate towards those deals without putting yourself in a financial hole.
One of the most important things you can do when you first start making big money is to find a mentor who can give you advice on how to manage it. Find someone that is not making money off of you to get financial tips from so you can avoid the pitfalls of money mismanagement.