Did you know that 9-10 lottery winners are broke within 5 years? It’s not surprising since most people are ill-equipped to handle the windfall of instant money. While structured settlement annuitants and lottery winners who opt for the annuity have better protection against unwise spending, bad investments, con-men and trustee mismanagement there are some safe guards that should be taken if you ever come into money.
Former dot-com millionaires, financial gurus and lottery experts have a great amount of advice on how to preserve your money including:
- Shhh, don’t say a word: Don’t update your Facebook status and call everyone you know telling them the good news. There was one case of a gentleman who bragged about receiving a legal settlement only to have his house robbed. You will have enough strangers, long lost family members and charities coming out of the woodwork soon enough so try to keep it a secret.
- Don’t change your lifestyle: One expert suggest that you do not change anything about your lifestyle for 1 year. I know that seems really tough to do especially if you’re living on your buddy’s couch but let the money sink in and don’t make foolish purchases.
- Get help: Hire a lawyer, accountant/tax expert and financial planner to help you make decisions regarding the money. Make sure you get a least 3 names and they are a member of the following organizations--National Association of Personal Financial Advisors, the Financial Planning Association, and the Certified Financial Planner Board of Standards. The American Institute of Certified Public Accountants has a list of CPAs who've earned the Personal Financial Specialist designation. The Securities and Exchange Commission (SEC) also has an area on their site to check financial firms and planners.
- Tax time: Depending on where you live, where you got the money from (lottery versus lawsuit) and how you’re receiving the payments there will be host of tax issues to consider. Get with a tax expert to discuss all of the implications before you do anything with the money. Don’t be like those few “celebrities” that didn’t pay their taxes and ended up in jail.
- No friends: Don’t lend money to old friends and don’t make new friends. Stay away from people in general because they will want to borrow from you or have an investment for you. Many times these new friends are scammers.
- No investing: Sit on your money and do not make any investments like buying artwork, businesses or stocks. Again see rule number 2.
- The 2% rule: If you can’t resist a major deal do not put more than 2% of your money into it. This way if this great deal doesn’t pan out you’re preserving your wealth.
- Watch your spending: If and when you make a few purchases keep it reasonable. Don’t buy a million dollar mansion or brand new cars for the entire family. Know where all your money goes, any fees associated with your purchases and other costs.
- Protect your identity: If it is possible protect your identity. Change your phone number, avoid appearing in articles and don’t make public donations. If you can, form a trust instead of using your name and always keep a watchful eye on your credit report.
- Stay healthy: Stress can kill you and no matter how much money you have it means nothing if you don’t have your health.
It's hard sticking to a budget, especially around the holidays. Here are some interesting, low cost ways to keep your holiday spending down.
- Start a tradition-Holidays are about traditions. Moneyning has some inexpensive traditions you can start with your kids.
- Get creative-MyDollarPlan offers 5 alternative and creative gift giving ideas.
- Cut spending-Nine easy tricks to cut your spending today via DumbLittleMan.com
- Have fun-Wisebread offers these 14 fun winter staycations.
- Save on Everything-Kiplinger.com offers their best of everything list.
Credit card debt fell slightly for July, August and September to $693 billion and the number of open credit accounts fell by 6 million, 23% down from its peak in 2008, according to a recent report released by Federal Reserve. Could the recent fall have to do with the pending holiday shopping season? Perhaps, since consumer spending for Black Friday/Cyber Monday was up considerably from last year.
One would have expected to see a decline in holiday spending due to stagnant wages and a 9% unemployment rate. Surprisingly consumers, enticed by the deals on consumer electronics, caught the shopping bug and whipped out the credit cards once again. Unfortunately for individuals who couldn’t resist the temptation, their recent shopping spree may have sent them into a debt spiral.
Even though there are tons of articles about budgeting and getting out of debt many people don’t realize they are in trouble until they’re in over their heads. What could have been fixed with budgeting, reallocating and cutting back now requires more drastic measures such as liquidating your assets. For some that means selling their home or borrowing from their 401k plan. For others it means selling their illiquid assets such as their future payments from an annuity, pension or settlement.
Selling may not seem like an ideal thing to do but if you are looking to get back on your feet, paying off high interest debt is a step in the right direction. Interest rates are at a historic low so buyers are offering some of the best rates in years. These highly competitive rates result in more money in your pocket. In addition, by paying off your debt you save money on interest payments making it a double win!
If you’re having financial difficulties and are considering cash out some of your future structured settlement annuity payments for a lump sum, give Rescue Capital a call at 866.688.3532.
We can explain all the options available to you and provide you with tools to determine whether selling is the right choice. If you decide to sell your payments, Rescue Capital’s team of professionals will be by your side throughout the entire process ensuring that everything goes smoothly.
The Department of Justice spent $4000 for 250 muffins. Doesn’t it seem sort of extravagant when you do the math? They also spent $121 million on conferences in a two year period including $600,000 on event planning. Now our cash strapped country has to pay the piper for such lavish spending. So what can you learn from such wasteful spending? Accountability and fiscal responsibility come to mind.
As we headed into a recession the government kept spending and spending. Soon we found ourselves deeper and deeper in debt. Rather than cutting back or at least try to control spending by purchasing cheaper muffins, getting competitive bids or hiring a full time staff member they continued down a path of irresponsibility. Obviously now drastic measures need to be taken to reduce spending, cutting costs and reducing debt; all this while trying to stimulate our troubled economy. Or they will need to come up with more money, aka raising taxes.
So what exactly does this have to do with you? While it is really quite simple, when times are tough it make sense to cut back on the little things to reduce spending rather than continuing on a path of debt and self-destruction. Things like skipping the mani-pedi, brewing your own coffee, bringing a bagged lunch or working a second job are small sacrifices you could easily do to save money and fund your emergency fund. By having such a fund, if something happens like your car breaks down or your roof leaks you will have the money to repair it. You wouldn’t have to incur debt or make drastic financial decisions.
Obviously there will always be the individual who continues to spend $300 on a pair of shoes so people won’t think they are hurting financially. But the truth is that you can only do that for so long before you get in over your head. At some point it isn’t about brewing your own coffee, it becomes about selling your assets such as your annuity, your car or your home just to survive. No one likes bill collectors and being in debt isn’t a picnic either therefore wouldn’t it make sense to live within your means and create a budget you can stick to?
Rescue Capital has a few tools on their website that can help you to reach your goal of financial responsibility. We are also looking into developing other tools too so if you have any suggestions on new tools or ways we can improve the ones we have just email us at firstname.lastname@example.org