However, you are going to want to protect that money to ensure that it continues to work for you for many years to come. What can you do to protect your new found wealth?
1) Put the Money in the Bank
By putting your money in the bank, you have guaranteed that your money is safe up to $250,000. If you have more than that, you can put up to $250,000 into as many different bank accounts as you would like. While the money is in the account, it will earn a few dollars of interest per year.
2) Buy Certificates of Deposit
A CD is a government-backed financial instrument that is almost guaranteed to be repaid when it reaches maturity. In addition to earning interest while the money is locked away, you won’t be able to touch the money for the duration of the CD. This means you won’t be tempted to spend the money on impulse buys or other risky financial decisions.
3) Purchase Index Mutual Funds or ETFs
Equities that appreciate in value have more favorable tax rates than other types of income. If you leave the money in the market for more than one year, you could pay nothing in taxes if you are in the bottom two tax brackets. Historically, the rate of return on money in the stock market is 6-12 percent per year.
4) Place the Money in a Trust
Putting the money in a trust can help you pass wealth down to future generations without burdening your heirs with taxes. If the money is put in an irrevocable trust, creditors typically cannot use it to settle debts within the estate. This may be a useful tool for those who own real estate that they want held outside of the estate for tax purposes.
5) Do Not Make High Risk Loans
Friends and family members may come out of the woodwork asking for loans for this business venture or to pay off their kid’s college education. However, do not make loans to people unless you have run it by an accountant first. It is easy to lose thousands or even millions of dollars in one bad real estate investment or when one restaurant goes under.
6) Separate Your Business and Personal Assets
If you own a business, create a corporate or LLC structure for your business immediately. Doing so will protect personal assets from any business lawsuits that come your way. Additionally, it may be wise to purchase an annuity or life insurance policy in case something happens to you and certain debts are called in immediately. For further protection, you may decide to visit My Lump Sum or other financial companies to turn those monthly payments into a single lump sum award.
Have you just received a large windfall of cash? If so, make plans to protect that money today. With good financial planning, you can provide for yourself and your family for years to come as well as provide for future generations. When your finances are secure, you can live your life how you want and live it to the fullest.
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