David Grant
Contributing Writer
instructor@mywealth.com
If you’ve been watching the news lately, and perhaps felt outraged by the huge compensation for some of the executives of a particular insurance company you are not alone. You ever wonder what it would be like to be given a million dollars?
If you think this question won’t ever affect you, then think again.
· At retirement age, you may be eligible to receive a pension in a lump sum distribution – that could easily be worth a million or more.
· You may receive it as a result of relocation (i.e. using money from a house sale in California and moving to a less expensive real estate location).
· You may receive an inheritance.
· You may have grounds in a lawsuit settlement.
· You may, (fingers crossed) win the lottery.
With all the money we are printing to solve this economic crisis, a million dollars is just not going to be what it used to be. In fact, the present value of the pensions of many of the local government employees like teachers and police officers are well above a million dollars.
However, for many of us, these scenarios won’t happen. You may receive a small inheritance, wedding gifts, a gift for your newborn child, graduation gifts, etc. No matter how big or small the amount, how you treat this money can change your life.
Here are the steps that will help you make the most of your good fortune and get you closer to financial freedom:
-Your first step should always be to determine your goals: because without financial goals your money will just disappear and you will not even know where you spent it, why you spent it or appreciate what you spent it on.
Do you want to pay off your house, fund your child’s education, buy a second home, have an emergency fund or pay off debt? Any or all of these goals would be legitimate, but make sure to write them down. Need some help in determining which to do in what order?
Which should be first?
- Establish an emergency fund. Make sure it covers at least 3 months of expenses. If you’re single, it needs to be at least 6 months. If you’re of a nervous disposition and think everything will break down on the day that you lose your job, make it a year. Peace of mind is priceless.
- Pay off all of your consumer debt. Why? This is usually the highest interest kind of debt: Credit cards, store cards, personal loans, car loans – pay them all off.
- Fund your retirement. Make sure your retirement accounts are being funded with a healthy amount. If you fund IRAs, then you can fund them with some of the lump sum you have received.
- Have children? Fund their college accounts with a healthy amount that will pay for part, if not all, of their college education. Not sure how much this or where to save, then check out www.savingforcollege.com.
- Pay off your mortgage. This is where financial planners are split in their opinions. Some suggest that you do the previous steps, keep your mortgage, invest the rest and carry on with life. Others suggest that you complete the previous steps, pay off your house and then invest the rest. What’s important is that you determine what is best for you, then decide, and have clarity moving forward.
These goals have lots of factors, so make certain that you understand them the best you can by taking our course for just $25. In addition, working with a financial planner (CFP(R)) to fully discuss your options and the ramifications (tax and otherwise) of your decisions can be well worth the fees.
The more educated you are, the better you and your financial planner will be able to work together to accomplish your financial goals.
Sincerely,
Dave Grant
Contributing Writer
