Nail a promotion? Get willed a large lump sum by your late aunt? Or maybe you just scored a multi-million dollar contract like today’s top picks at the 2014 NBA Draft—this year’s number one pick will get a deal worth $8.8 million guaranteed over two years, with a possibility of $19 million over four. No big. However, no matter how lucky you think you are, you’ll need a plan for holding onto your money as long as possible. Here are five tips for staying rich and making the most of a cash windfall.
Put off large investments until you’re confident
Rookies only get two years of guaranteed contracts, after which they may see themselves back in the real world before they know it. Thus, they avoid expensive commitments lest they suddenly find themselves carrying a massive mortgage with no cash flow. You’ll want to make sure to stretch your good fortune out as long as you can, so instead of dropping an irretrievable amount of your windfall on a huge home down payment or a new car, consider renting or entering a reasonable lease until you’re certain you’re on solid footing with your newfound wealth.
Give yourself an allowance
Speaking of being cautious, one way to ensure you stay newly-rich is to give yourself an allowance. It removes the temptation to spend large amounts frivolously and will help you retain what you know about the value of money (it’s funny how quickly wealthy people forget). Keep the bulk of your wealth in a savings account and set up an automatic transfer to your chequing account to give yourself disposable income. That way, you’ll not only not spend the untouched sum, you’ll also earn interest on it. That’s a win-win.
If you have more, save more
If you already have a stream of income and happen to find yourself inheriting a large wad of cash, don’t fall into the trap of having more, spending more. Use the sum as a safety net so you can save more money more comfortably. NBA rookies starting out are often taught the worth of money very quickly, both by their teammates and the league itself. They may save up to 40 per cent of what they earn, which is something you should aspire to if you find yourself in a prosperous situation.
Live a little
Sure, spending crazy amounts will get you nowhere, but leaving all your money untouched will only make it that much more tempting to make a poor, costly decision. So go on. Live a little. Save up that allowance you’re giving yourself to splurge on a big purchase that will leave you feeling satisfied.
If you don’t trust yourself, set up a trust
Maybe you’re young and you know it, or you’ve gone without for a long time. Whatever the case, if you really want to keep your money out of reach until you need it, follow in the footsteps of last year’s rookie star, Michael Carter-Williams. Lock part or all your money away in a trust fund. It’s a guaranteed investment that will grow your money over time, an added benefit of removing temptation.