Budgeting after a Windfall
With the London Olympics coming to a close, many athletes now have something, aside from medals, that they didn’t have before the games: fame. Some of these athletes will probably receive lucrative endorsement deals once the games end, and they will likely have much more money than they did before their trip to London.
Celebrities who Struggle with Bankruptcy and Debt
While this is certainly a wonderful time for these Olympians, many athletes and celebrities have mismanaged their money and ended up in debt as a result. MC Hammer earned millions, but lavish spending habits and bad investments led him to file for bankruptcy in 1996. More recently, former NFL star Warren Sapp filed for bankruptcy. Also, former Philadelphia Phillies and Boston Red Sox pitcher Curt Schilling recently admitted that he had blown a large part of his baseball fortune on a failing video game company. Unfortunately, many more celebrities and professional athletes have filed for bankruptcy and are struggling to repay debt.
Money Management
You can learn a lesson from these examples: If you have more money, you have more to manage. After receiving a windfall, you will need to budget for everyday expenses, taxes, and larger purchases or investments, and you will need to be prepared for events like financial setbacks. You can also expect increased pressure to give money to others, and you need to plan how you will handle these situations. If you receive a large inheritance, a substantial increase in income, or another financial windfall, keep a few things in mind:
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Taxes: You may end up in a higher tax bracket with a financial windfall. Figure out if this is the case and calculate how much you will owe in taxes before spending anything.
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Budget: Even if you managed your money well beforehand, you might be tempted to spend your additional money lavishly. Plan your splurges carefully. Come up with a written plan on how you will use the money, and use budget tools and other resources if you need help.
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Learn How to Say “No”: You may find yourself dealing with more requests for financial assistance. While helping out friends and family can be tempting, you can’t help everyone. Money is a common theme in arguments between friends and family members, and relationships can be strained or ruined as a result. Ask why someone needs help and consider the consequences before giving someone money.
Remember that money is a scarce resource. No matter how much you have, you need to use it wisely. If you are having trouble doing so, ask to speak with one of our certified credit counselors by calling 888.737.2933.