Tips on how best to deal with a huge cash influx

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RALEIGH, NC (WNCN) — Friday night’s Mega Millions jackpot has risen to nearly $1 billion, which could be a very big windfall for the lucky winner.

Lotteries are not the only way people make large amounts of money, however.

Insurance and estate settlements can also lead to large payouts.

If you find yourself with a big financial windfall, you think this is great – all my money problems are over. But honestly, over 70 percent of people who get a big stack of cash it loses in just a few years.

“Most people file for bankruptcy within 4-5 years after being handed a large sum of money,” says finance lecturer Ajaie Albert.

The mishandling of a sudden influx of cash doesn’t surprise some Raleigh residents.

“They just act impulsively,” said Mike Farly. “They just don’t make wise decisions.”

The lure of big money creates big dreams for people.

“I would buy a house and give it back to my family, my husband’s family and charities,” said Raleigh resident Keenan Warren.

However, an influx of a lot of money can lead to more problems. There are three things that can quickly eat it up: taxes, debt, and inflation.

When you first get your windfall, keep some reserves handy by putting money aside in a small emergency account.

“That’s for those little things like your water heater going down, or your car needing maintenance,” said Albert. “You want to put in somewhere between $1,000 and $3,000 and put it in a bank savings account.”

You should also set aside a larger amount of cash for major emergencies.

“That’s six months or more of your expenses,” he said. “Put that in a high-yield or diversified fund account so it can grow while it waits for an emergency.”

Before you take even a dime of money, you need to know how to handle it. Come up with an action plan and practice financial literacy.

“Invest in those people who will help you minimize your taxes, help you pay off debt, and help you fix your credit score,” Albert said.

Those people could be accountants, financial planners or even stockbrokers.

Before you let someone handle your money, examine them carefully and check their reputation. Start online and use multiple resources to research them.

The worst thing you can do is hire someone who is going to steal your new money and run off.

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