While suddenly coming into a large sum of money can certainly solve some problems, it can also simply create a whole new set of problems; namely, what to do with it. Many a lottery winner has ended up even poorer than before they got their unexpected windfall and many an overnight millionaire has ended up in bankruptcy court. One of the best ways to make your windfall last is to invest it but even that can be tricky. Here are three tips to help you invest large sums of money.
- Create a budget and stick with it
When most people think of having a “lot” of money, what they generally mean is having so much money that they no longer need to concern themselves with things like budgeting or planning. The truth is, the best way to lose a lot of money is to fail to manage or shepherd it carefully. In order to know how much money you have to invest, you need to know how much steady income you need to live on. Without a budget, you will mostly likely just spend and spend yourself right into the poorhouse.
- Pay off any interest-earning debt
No matter how much you may earn in interest from your investments, it doesn’t do much good if you are paying even more interest each month on your debts. Paying off high interest-rate debt can also save you a fortune and even send your credit score soaring. Before you start sinking money into interest earning accounts, be sure and pay off any debt that is just draining interest faster than your nest egg can generate it.
- Diversify, diversify, diversify
Nowhere is the old saying about not putting all your eggs in one basket more true than in the world of investing. Different types of investments come with different levels of risk and liquidity. Socking a large chunk of money away in a 401K is wise, but it also won’t carry you through an immediate emergency. Setting a healthy amount aside in savings can help you in the here and now but won’t do much to increase your fortune over the long haul. No one can predict the future but you can best protect yourself against it by investing in a few different types of products.
Securities offered through Sanctuary Securities, Member FINRA and SIPC. Advisory services offered through Sanctuary Advisors, LLC, an SEC registered investment advisor