Wednesday, 24 August 2016

Financial independence overnight

Let's say that you just won the big prize. You are a normal person, who never had any specialized financial education. What to do next?

1. You still need to pay your tax for the money you won, so it is recommended to find out what you have to pay and pay it.

2. If you have any debts, student loan or mortgage, pay them.

3. You need basic control over your emotional state, in order to understand your comfort zone and your limits. If you buy shares, for example, and the price goes down, will you sell? Or will you buy more? Are you prone to make impulsive decisions? You need safeguards and restraint in order to not spend it all in the next few years? Do you feel tempted if someone come to you with a investment with a 25-75% annual return (this is too god to be true, you know that, right) ?

4. Keep your identity and lifestyle the same if possible, maintain a low profile, and a need to know basis. You can tell to your wife, and your kids, maybe. If word goes by, a lot of people will come to you with real or not so real problems, asking for financial help. It is better to remain anonymous and support the causes that are important for you.

5. Priorities, goals and values. Do you want to live in another country, or countries? Do you want to still keep your work or stop doing it? Do you want to have another career that you always dreamed off, but you did not have the time and the money to follow it? Do you want to spend more time with your family? To travel around the world? To buy another house or car? Your partner have the same priorities like you or you need to compromise?

Keep in mind that 9 out of 10 lottery winners end up broke 5-10 years later.

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