How to Handle Instant Wealth

A financial windfall like a lottery win or inheritance is not only about new possibilities, but also about money shock. How to deal with it and turn the sudden money into lasting wealth?

Why can sudden money turn into a living nightmare? Unexpected cash infusion may derail a person’s emotional stability. Many people don’t realize the size of the windfall may be not enough to satisfy all the goals they have in mind. So, if you lose your head, it’s easy to skip something really important. Also, you may experience feelings of guilt and fear, pressure from your family and friends.

You don’t have to get a really big sum of money to start experiencing money shock – 4 months’ worth of salary is enough.

Take some time for cooling off

You need a 6-10 months’ pause to adapt to the money shock and fully understand the limits and the possibilities of the newly found wealth. It’s not uncommon to overestimate it – the fact due to which so many lottery winners fail to prioritize their goals. Certificates of deposit may be a safe way to park the money till you’ll be able to deal with it.

Emergencies first

Think of any emergency situations you have. Having funded them, you need to make sure that you’ve got an emergency fund. Many people already have one, but if you don’t have a dime in savings, that’s what needs your attention first.

Manage debt

At this point you need to act judging from the amount of your newly found wealth. Credit card debt might be your priority, but if it’s going to eat up all the money, don’t clear it up at once. You need to have some money saved for an emergency; otherwise it’s hardly possible to get out of debt. Choose the credit cards and loans with the highest interest rates.

Invest in your future

How many windfalls like this can you possibly have during your life? This may be a chance of a lifetime to safeguard your future. Some of the long-term goals you may consider include saving for retirement, getting a degree or educating your children.

To create an investment strategy, you may need expert help. A financial professional will help you estimate profitability index of projects you’re considering.

Reward yourself

New Year Money Diet

January is the time of the year when we make resolutions and vow to be a better person, while getting rid of all (or at least most of) our bad habits. One way involves taking stock of our finances and the best way to do this is by going on a money diet.

What is a ‘Money Diet’?

Just as how you’d go on a diet to cut out all the ‘harmful’ food from your meals, a money diet gets rid of all the ‘bad’ spending that you’ve been doing. Call it a financial cleanse of sorts, where you eliminate all unnecessary spending and end up saving more money. It won’t help if you’re a compulsive spender but it will do you good if all you want to do is tighten the belt after spending too much over the festive period.

How to do it…

Make a plan

Start by giving yourself a time frame, so you can evaluate how you’ve done at the end of it, by looking at your expenses and savings. It’s also good to set a target for the end of this time frame, say, to save $1,000 by the end of it. This gives you more motivation, just as an ‘ideal weight’ does when you’re on a diet.

Cut non-essential items

It’s fabulous to check out a new posh restaurant every month or meet the girls for martinis every fortnight but is this really necessary? It could be as simple as forgoing the coffees you have every day from that nice cafe next to your office; a hot beverage from your office pantry is a better option here. One unplanned advantage is that you might realise you’re perfectly happy without these things and actually enjoy staying in and cooking up a storm instead of going out to eat all the time. Or that you really enjoy staying in with a good book (from the library, of course) instead of going out partying.

Get support

Your family and friends will most likely be supportive of your money diet so tell them you’re on it and you’ll find it easier to cope. It also means that they’ll be willing to spend time with you while doing inexpensive activities so you won’t have to hibernate for the duration of your money diet.

Everybody, needs some amount of emergency cash savings in case their expenses rise unexpectedly in any given month.

How big depends on how variable your income is and how much you spend.

If you spend only 20% of your average monthly income, which only varies slightly, you’ll need a much smaller emergency fund proportion-wise than, say, someone who can go months without closing a case, and who spends 60% of his average monthly income.

For instance, a tutor who earns an average of $5,000 a month may actually make between $2,000 and $7,000 each month-$7,000 during exam time when students ask for extra lessons, and $2,000 during the school holidays.

For this tutor, the ideal situation would be to keep his monthly spending to below $2,000. That way, he knows that even in the lean months when he doesn’t have much work, he’ll be able to comfortably cover his monthly costs. He can then feel free to save and invest the balance, after putting some cash aside in his emergency fund.

I hope these tips help your dieting.

Happy new year.

Managing Small Business Taxes for Startups With High Profits

When your profits are high as a small business, you might feel some pride and a boost in confidence. You are doing what you want to do and you are doing it well. The only issue here is that things might get a bit more complicated. Taxes for a small business with high profits might seem unmanageable, especially if you do not know how to deal with this type of situation. Taxes for small business situations like this should go to the professionals. A small business consultant, a bookkeeper, can handle this far more effectively than you might be able to. This means better results and fewer risks moving forward.

Bookkeeping for small business taxes and profits is the smart choice when you are making a lot of money. When your profits are high for a business of your size, you should have a bookkeeper helping you. The higher the profits are, the more complicated this can get. It is sometimes more complicated than you can manage. If you try to take it on yourself, you might make mistakes or you might forget something. Any issues with your taxes could hurt your business in the end. A bookkeeper is capable of managing this with lowered risks overall.

On top of better quality results, you also have a specialist handling something that requires a large amount of time and work. Taxes for small business startups are not simple, especially when you have found a lot of success. When you have an entire business to manage and a lot of people going to you, you do not want to spend what little time you have to yourself managing the taxes. Bookkeeping for small business taxes will handle this work so that you can focus on the rest of the business. You will get the work you expect without having to put in any of the time or an effort yourself.

A small business consultant can work with your taxes and on a level just right for your business. This is a specialist in the field who focuses only on bookkeeping. You will not have to worry about difficulties with managing your taxes or issues with the quality of the work. Everything meets your standards and the expectations of the government for taxes. You can continue to work on your business while trusting that the taxes receive the care and work that they demand. It is the best solution.