Even though you work hard all your life, it can still be a little overwhelming when you get that financial big break you’ve been waiting for your entire life. Having all that money all of a sudden is certainly a wonderful feeling, but it may also seem a bit too much to handle – especially if you haven’t had experience dealing with large amounts of money or wealth previously.
However, that is a pivotal moment in your life. How you choose to manage your finances now will dictate how well you can continue to earn and maintain that wealth in the future. One wrong move can undo all your hard work and you will be out of money before you know it.
Ask Kristen Heaton, an American entrepreneur who sold her business for seven figures in July of 2021. Her product, Crave Naturals, a detangling hairbrush that had sold over a million by then, and was bought by Amazon aggregator Perch. So, when Kristen suddenly had all that money to handle, she didn’t know how to best utilize it. Thankfully, she hired a financial advisor who helped her navigate her new wealth.
Whether it be that you’ve sold your business, received a large inheritance, or landed a high-paying job, you should be aware of how best to take care of the newfound money so that it grows and sustains itself in the future. As Kristen has learned since her own “jackpot moment”, here are 4 best practices to manage new wealth successfully:
Hire a Financial Advisor
Like Kristen, the smartest thing you can do when you’ve got new wealth is to hire a financial advisor with experience navigating large amounts of money. She also recommends getting advice from people who come from “old money” or those who have been wealthy for a while now.
“The first thing I would do if you ever do come into money that you’re not accustomed to talk to people that come from money, talk to people that have had new wealth in their life, different entrepreneurs. See where they focus their time and efforts growing their money and keeping it safe,” said Kristen.
Kristen also says that a financial advisor helped her navigate the often-volatile stock market. “I tend to be a risk taker, and it wouldn’t be unheard of for me to invest in some risky stocks. So working with a financial advisor, will work with me to buy those risky stocks, but then also offset it with safe stocks and stocks that provide dividends over time and whatnot, so that we can aim to grow the portfolio in a more moderate-risk approach,” she said.
Invest in Generational Wealth
Ask any parent and they’ll tell you that one of their biggest concerns is that their children might face hardships in the future. Therefore, parents tend to do whatever they can to help eliminate these hardships. If you’ve come into new wealth, put aside some of it to help grow generational wealth.
Investing in real estate is one of the most common ways that families build generational wealth, and it was no different for Kristen and her family. “One of my biggest concerns right now is that the next generation, they’re probably not going to be able to afford a lot of housing. So it was just really important that we bought some properties that we knew we could pass on to them later on in life so that they were going to be OK.”
Apart from this, you can also set up college funds for your children to help them get an education without worrying about debt, and even a trust fund that they can access once they become adults.
Grow Your Money
One of the best ways to maintain new money is to use it to generate more money! For Kristen, this meant starting another company. The sale of Crave Naturals spurred her creativity and motivated her to start a new venture. Plus, now she had an advantage that she didn’t when she started Crave Naturals – money to spend on it!
“We had the money at this point to be able to hire like a branding agency brand voice and just have a cohesive brand to launch. Whereas with Crave Naturals, it took us years to be able to afford that sort of thing,” she said. Her new product, a foot-care line called Bare August, is now available on Amazon.
Whether your personal journey is the same as Kristen’s or not, you can still find ways to invest in new ventures. If you do not have time to run a business of your own, you can seek out other promising entrepreneurs to invest in. Or you could go in the direction of stock market investing. The point is to always keep looking for ways to build your wealth instead of letting your money lie stagnant.
Pay it Forward
Kristen says that it’s important to remember that your success didn’t come out of nowhere, that it’s important to remember that there were many helping hands that propelled you forward in your journey – and we couldn’t agree more. This is why it’s essential to pay it forward.
Kristen says she started Crave Naturals when she was in a lot of debt and living paycheck to paycheck – and it was her friend’s husband who helped her sell her products online. “He actually paid for our first round of inventory,” she said.
This is what has inspired her to help struggling entrepreneurs who are in the same position that she was. “If there’s an entrepreneur that needs help along the way, or they need somebody to invest in them financially or through mentorship, that’s something that I have an interest in doing along the way. I feel like it could pay off for both myself and the entrepreneur.”
Paying it forward can look like helping others find their footing in their careers or helping a business grow. You can also set aside a portion of your income/wealth to be donated to charities or needy causes that you are passionate about.