Okay, you just won five million dollars through gambling, and of course, you are excited. It has been years of spending so much money throwing the dice, and finally, you got lucky. You have certainly been looking forward to this day, but now that it is here, you are a bit confused. So much money at once could be pretty overwhelming, and you could fall into the temptation of wasting the money. A month later, you are back to status quo and throwing the dice again. Good news is that doesn’t have to happen. You can use the money won correctly, and this article will give you tips to help.
Spending money wisely is an important skill. Don’t worry if you’re not a math genius. Excellent mathematical skills are not really necessary, you just need to know basic addition and subtraction. Life is much easier when you have outstanding financial skills. The way you spend your money affects your credit score and the amount of debt you end up having. So, even if you have just won an enormous amount of money, if you don’t spend it well, you could end up going back to living from check to check. The first tip is that you should be careful when making spending decisions. For every purchase, you need to ask yourself if what you are about to buy is really important, or you could live without it. Sure, you can splurge a bit but going over the top could only end in a disaster. Instead, carefully look at all your bills and expenses. Then, look at what is left after essential needs are met. Here are some items that you should try not to waste your money on:
Things you shouldn’t waste your winnings on
Today, electronics is almost a necessity, but that does not mean you have to spend money to get the newest. The new and bright sensation of its devices is short-lived, and it is almost guaranteed that there will be a more modern and better model of the device that it has in the next year.
- Home decoration items
You don’t have to waste hundreds of dollars to get the latest look you see in the magazine. There are always ways to achieve the same look. You can turn it into an experience and a time to interact with friends and family.
Keeping up with the newer car models is not a smart lifestyle unless you can buy each of them when the next model comes out. This is a way to put yourself in an endless debt hole. You will never be able to spend your money wisely if you keep buying cars that you probably can do without. A nice ride is cool, but how much do you need about seven vehicles? Obviously not a necessity.
- The latest fashion wears
There is nothing wrong with buying new clothes, bags and shoes from time to time. But when the point comes when you try to get every bag or pair of new shoes for about 500 dollars, maybe you should skip one of these and save money for something else. There will always be a new fashion item in town, and it makes no sense to spend all the money that you have won so luckily on precious closet space.
How to better manage your money
So, it’s time to talk about the crux of the matter. How do you use the money that you have won correctly? Of course, there is no major template for this, but this will serve as a guide to help you spend your winnings wisely instead of going back to empty pockets after a short while. Here we go:
- Create your budget: Many people don’t budget because they don’t want to go through what they think will be a tedious process of listing expenses, adding numbers and making sure everything aligns. If you are mean to money, you have no room for excuses with the budget. If all it takes to route your expenses is a few hours working on a budget each month, why wouldn’t you? Focus on the value that the budget will have in your life.
- Keep to your budget: Your budget is useless if you prepare it but let it accumulate dust in a hidden folder on your bookshelf or filing cabinet. Check to make sure that your spending decision is according to your budget. Update it regularly based on your expenses. At any time during the month, you should have an idea of how much money you can spend.
- Limit expenses on things that are not on your budget: A critical part of your budget is the amount of money that is left after you have subtracted your expenses from your winnings. If you have money left over, you can use it for fun and entertainment, but only up to a certain amount. You can not go crazy with this money unless the odds of you winning a tremendous amount of money again is 100%. Before making large purchases, make sure it does not interfere with anything else you have planned.
- Keep track of your expenses: Small purchases here and there add up quickly, and before you know it, you have spent way over your budget. Start tracking your expenses to discover places where you may be spending without knowing it. Keep your receipts and write your purchases in an expense journal, sorting them so you can identify the areas where you have difficulty controlling your expenses.
- Do not commit to any new monthly recurring invoice: The fact that your income and credit make you qualified for a loan doesn’t mean that you must accept it. Many people naively think that the bank would not approve them to get a credit card or a loan that they cannot pay. The bank only knows your income, as you have reported, and the debt obligations included in your credit report. Of course, you wouldn’t be looking for a loan after you have just won an enormous amount of money. However, you could be tempted to subscribe to a service that requires payment monthly or even weekly. If it is something that is not of value, don’t do it.
- Be sure to pay the best prices: You are rich now, so you believe that you can pay for anything. Red flag. You could end up getting it at four times the original price without knowing. So, don’t get too cocky but ensure that you are paying the lowest possible prices for products and services. Look for cheaper discounts, coupons and alternatives whenever you can.
- Save for large purchases: Do not make large purchases impulsively. When you postpone large purchases, instead of sacrificing more important essential items or placing the purchase on a credit card, you have time to assess whether it is necessary and even more time to compare prices. And if you save instead of skipping bills or obligations, well, you don’t have to deal with the many consequences of failing those bills. That money will eventually run out when you keep making large purchases. It will be sad if you have left so many bills unpaid.
- Contribute to savings regularly: Depositing some of the money won into a savings account each month can help you develop healthy financial habits. You can make this transfer to become automatic so that you won’t be stressed with keeping up with it.
- Make investments: There are a lot of investment options out there. You need to make your winnings multiply instead of running out. The best way to make this happen is to invest. A good financial adviser will say “let your money earn for you”. This means you should take the time out to do some research about the best investment options out there. However, do not take advise from anyone who is not a professional. There are trustworthy financial advisers who will be willing to give you the best options. They could include stocks, real estate, Forex or even treasury bills.
- Secure your home: You may not have realised it, but a huge amount of money goes into rent. One of the best things you can do with the money won is to buy a home. It doesn’t have to be huge, with too many unnecessary fixtures or super flashy, but as long as it is comfortable and in a pleasant suburb, you have just taken a substantial recurring bill off your list.
Being good with money requires practice. Before winning that massive amount of money, you may have been accustomed to planning ahead and postponing purchases until you can afford them. Now that you suddenly have so much money, you could be tempted to spend it all. However, if you develop good financial habits, it will be easier to manage your money and make your finances better. With this, your winnings can make you super-rich for as long as you live.