22 Things ‘New Rich’ Must Do With Newfound Wealth

16. Don’t Forget Taxes

The federal government taxes any amount of money that you inherit or win. You know you need to pay them once a year. It’s not everyone’s favorite time of year, but you will like this moment less when you suddenly become rich. Because the government will take newfound wealth as a form of income, you need to claim it on your taxes.

Even if you win through gambling, the government has a way of tracking the large winnings and will find out if you didn’t claim your new wealth on your taxes, which will leave you with fines and other payments on your taxes. If you want to spend some money right away to pay off your student loans, credit card debt, or bills, you will want to put at least half of your money away for tax purposes.

15. Pay Down Debts

Debt is one of the biggest reasons people feel stressed out. You work hard for the money you make, and it seems that all of it goes to bills, groceries, gas, and other necessities. In fact, most people have trouble making their paycheck stretch until the next time they get paid because they don’t live within their means, They have difficulty budgeting or maybe find themselves in hard financial times.

Once you come into money and are newly rich, the first and only payment you should make before taxes is to pay down your debt, if not pay it off. Debt eats away at your life, and as soon as you see the money in your account, you should start making larger payments on your credit cards, loans, or call the company and settle with them as you can pay your whole bill off.

14. Make Investing A Priority

While most people want to pay off their debt (go for it) and go on a shopping spree, buy a new car, or a bigger house (don’t), one of the first steps you should take is learning how to handle a large sum of money. To do this, you will need to talk to a financial advisor who can help you invest in your money through savings bonds, high-interest savings accounts, trusts, or other means.

When you invest the money, you can’t spend it foolishly, will think about pulling it out to spend it, and are more likely to let it build, which will make you more prosperous as the interest grows. While your money is growing instead of shrinking, you can continue to work with your financial investor to work on a plan to keep money coming in.

13. Live Comfortably, Don’t Spoil Yourself

If you are living in a home that’s falling apart, spend the money to get it fixed. If you are living in an apartment that’s too small for your family, find a bigger place to live with them. You don’t need to spend too much to do this, and you deserve to live comfortably. However, this doesn’t mean you need more bedrooms than you need or a house that is extravagant.

Always think about how you will pay for your new lifestyle if your money disappeared tomorrow. You have a chance to keep yourself out of debt while living a comfortable lifestyle, but not wealthy, comfortable. For example, you can pay off the loan on your house and car, but don’t move into a new neighborhood or buy a brand-new car.

12. Prepare For Change Ahead

One reason you shouldn’t tell people that you became rich is that you need time to prepare for the changes that are coming your way. Most people, even people you consider your closest friends and family, will start to treat you differently, and this can cause problems across the board.

It is not just people you know that might change, but people you don’t know. Because you have money, you have a target on your back. For example, people are more likely to sue you, or they could attempt to target you in a scam. When it comes to these changes, you will realize that having money isn’t all it’s cracked up to be. While you no longer have to worry financially, you definitely have other worries to consider.

11. Follow the 5% Rule

One of the best ways to make sure your money lasts is by following the 5% rule, which tells you that you need to invest all the money you receive or what you have after paying off your debt. From there, you’ll receive an annual return from the interest, which is something that you can use to put into your savings or checking account and treat it as income.

You might not think that 5% of your money is a lot, but if you receive $5 million, then your annual return is about $250,000, which is a lot more than most people have to live off of. Furthermore, following the 5% rule will make sure that your money is safe, and should, in theory, last for the rest of your life.

10. Don’t Lend Money To Friends Or Family

This is a hard rule to follow. You should be cautious and do your best to say “no.” Remember, you never need a reason when it comes to saying “no,” as this is a statement all by itself. You’ll probably want to take care of the people around you, especially your siblings, parents, and best friends. You can help them if they are genuinely struggling, but the best step to take is to tell them “no.”

The truth is, once the money is gone, you will not get it back. They will not pay you back because you didn’t directly earn money, so why should they have to pay you back? No matter how kind a person is, knowing that their sibling has money can change them as they now feel entitled to a portion of the money you and they didn’t earn. Protect your money so you don’t need to struggle and find a way to help people without loosing too much of your protection.

9. Live Up To Your Responsibilities

Rich people still have obligations. In fact, these responsibilities are the same as everyone else. They need to pay their bills, taxes, take care of their children, pets, and overall obligations. While many people who have money will pay for other people to do certain things, like clean their home, it’s still their responsibility to ensure their staff does their job.

The reality is, if you let go of your obligations, you’ll give yourself a bad name. No amount of money is worth giving yourself a bad reputation or name. Plus, most of the time, you’re not the only person affected by your poor decisions. Also, if you stop caring about your responsibilities, what are you teaching your children?

8. Decide How You Want To Receive Money

You might not always have a choice, but it is possible that you can choose to receive all the money at once or over time. For example, you can receive your inheritance through a trust where an amount is given to you annually or every six months. If you are given a choice, you need to select the option to receive the money over some time.

Selecting this will help you in many ways. You won’t want to spend all the money at once because you won’t receive a large chunk in one sum. Therefore, you’re more likely to spend your money wisely and invest it. Furthermore, you won’t have a giant target on your back as people will realize that you don’t get all the cash at once, so they won’t see you as rich.

7. Don’t Lose Sight Of Who You Are

It’s been discussed previously and you’ve heard this phrase countless times; money changes people. This doesn’t just include friends and family, but also you. The fact is you won’t even realize the changes until it’s too late and you have lost essential friends or find yourself broke and understanding all the mistakes you made.

Losing sight of who you are when it comes to your wealth is easy to do. Even if you think you will never fall into this trap, it can happen to you and anyone else. This doesn’t make you a bad person, it makes you someone who doesn’t understand how to handle money. This is why finding a financial advisor who is reputable and helpful is one of the first steps you should take. Along with that, you can find someone you trust to help keep you in line, but it’s up to you to listen to them.

6. Establish A New Budget

This is different from your plan of action if you come into wealth. Establishing a monthly budget includes your bills, income, and anything else that you must pay or receive. You might not think that you need a budget now that you are rich. But without a budget, you’ll start spending too much money, you won’t save what you should, and you won’t think about how you are acting with your money. This can turn into a disaster and you could find yourself broke within a few years.

When you establish a budget, you’re following a plan that allows you to stay on top of your wealth, pay off your debt, and follow through on paying your bills so you can continue to live comfortably and help your children when it comes to going out on their own. One crucial factor to remember when you are creating a budget is inflation. Prices will continue to rise, and your interest or income might not grow with it. Protect yourself by staying one step ahead within your budget.

5. Increase Self-Discipline

Self-discipline is not the easiest characteristic to learn and seems nearly impossible when you don’t start learning from your childhood. In fact, one reason people struggle when it comes to handling money is that they don’t have a strong sense of self-discipline. They think they can spend while they have the money and then wonder where it went once they find their bank account low.

There are many techniques you can use to boost your self-discipline so you are more likely to save instead of spend. For example, leave $20 in a place that is easy for you to grab and spend and see how long you can leave it before you spend it. Then, note what you spent it on like groceries or something you didn’t need. Continue to do this to keep the money in that location longer than next time.

4. Keep Things Simple

You want to keep things simple. Even if you’re a millionaire in a small community and can’t hide your newfound wealth for an extended period, you want to be cautious of the actions you take with people, especially when they ask you for money.

For example, you receive a call from a local nonprofit asking for a sizable donation to start a new project to help children in your area. You’re supportive of this charitable and the children, but you don’t understand the new program. Don’t jump and say you will help because your heart tells you to. Instead, set up a meeting with the director, yourself, and your financial advisor. Meet with your advisor before you sit down with everyone so you can come up with questions and understand how much to invest in this project.

3. Get An Attorney

Those are some scary words for anyone to hear – that they need to get a lawyer. Usually, you hear these words because you are in some form of legal trouble, but this is not the case. Obtaining a lawyer as soon as you become rich simply protects you from the damage some people will try. For example, if someone comes to you with a business proposition, you always want to talk to your financial and legal advisors and probably aim toward saying “no.” It’s a lot easier to say this one word when you have people with authority backing you up.

Another reason is that your lawyer can start to prepare you against anyone that is trying to scam or sue you for any reason. They can advise you on your rights and the best course of legal action to take, if necessary. Furthermore, they will help you when it comes to your taxes by explaining the laws and direct you to the best tax representation.

2. Think About Your Marriage

It’s a famous story for many people. They become rich suddenly, whether through celebrity status, gambling, or inheritance, and find themselves in the arms of another person. This new person is someone different that offers you a different view. Now that you are rich, people are throwing themselves at you. They will find you when you are weak, and the temptation is expensive.

In fact, the temptation often ends in a divorce and a bitter custody battle. Plus, because you received that money while married, your spouse is entitled to half of it. Of course, this might not be the case if it is inheritance, but that depends on state law. The fact is, you can ruin more than you ever imagined by letting someone open their arms up to you. All this person wants is your money while your spouse doesn’t see you as a dollar sign.

1. No Matter What, Play It Safe

Above all, no matter how much money you receive and what you do with it, the best way to make sure you don’t find yourself struggling financially again is to play it safe. This includes finding a financial advisor, and you can trust and talk to them about how to set up investment accounts, savings accounts, and how to pay off your debt.

Don’t jump into anything because you have money and can spend it without overthinking about where your money is going for a little while. This can quickly turn into a big mistake that causes you more trouble than the money was worth. Furthermore, you want to remain the humble and caring person that you are. Always think about your actions and how they are affecting other people without giving all your money away.

Sources:

“13 Things to Do If You Suddenly Become Filthy Rich.” Jon C. Ogg, 24/7 Wall St. January 2020.

“15 Things to Do If You Get Rich All Of A Sudden.” Emil Anton, Alux. January 2019.