What to Do With a Sudden Windfall

It may seem like an impossible dream, but the truth is most of us will come into a decent sum of money at some point in our lives. This can come from many sources. Some people inherit funds from deceased loved ones. Others may have a scenario where a parent or relative purchased bonds or stock to be given as a gift at some point during adulthood. Still others have the skill and fortune to rake in a huge payoff at the lottery or video poker games. Even if these eventualities seem far off or unlikely, you will probably find yourself in possession of a hefty sum within your lifetime. Probably more than once. What you do next is vitally important.

1) Take a breather. The thrill of a sudden financial acquisition can cloud your judgment. For this reason, we recommend setting the money aside for as long as six months. Just take the time it takes for the surprise to wear off. Now you can decide just how to use the money wisely so it doesn’t disappear on you. An estimated 70% of lottery winners go into bankruptcy in the years following their win. You may not have that much money to work with, but even a few thousand dollars shouldn’t be squandered. If you aren’t used to having money to spare, you may need to wrap your head around just what money like that can do. And what it can’t.

2) Pay off Debt and Taxes. Even if you were to invest your money directly into stocks and earn 10% back, you would still be losing money if you have credit card debt with interest rates of 17-25%. It’s best to pay taxes on your windfall, then focus on the debt you have. Once it’s gone, you can begin saving and spending in a meaningful way, without hemorrhaging money at every turn.

3) Talk to a Professional (and maybe no one else). A CPA (or Certified Public Accountant) can give you objective advice on how best to use your money. Make sure you ask your CPA if they sell financial products, just to make sure they aren’t trying to rope you in to any particular deal. I recommend a CPA because they are unlikely to take advantage of you, but any trustworthy financial professional will help. A financial professional like this can help you understand all the possibilities for your money. Maybe you want to start saving for retirement, a home, or your child’s future education. Learn about investment opportunities to make sure that this money isn’t here today, gone tomorrow.

Also think about keeping quiet about your sudden good fortune to family and friends. Those we love very frequently try to get a piece of the action when we experience sudden financial luck. Maybe your family will respect these boundaries, but it is good general practice to be judicious about how you announce your wealth. Better to keep it to yourself.

4) Stick to the Plan and Have Fun. Once you have an idea of what you are going to do with your money, stick to it. Maybe you have formed a plan where you will get a 5% payout every year. Maybe you want to spend 10% now and use the rest to grow with interest for the next 15 years or so. Whatever you have decided, don’t deviate from it once you have moved forward. Then enjoy your money!

How to Apply the 80/20 Rule to Your Side Hustle

Is your side hustle not going according to plan?

It’s a hard pill to swallow, but you’re not focusing on the right stuff. Or at least, that’s what Pareto’s Principle would tell you.

Simply stated Pareto’s Principle, or the 80/20 rule, says that twenty percent of what you do brings eighty percent of the results. In my own side hustle experiences I’ve found this to be true.

If your side hustle is failing, chances are you’re doing the busy work instead of the results-producing work.

You can turn this around by applying the 80/20 rule.

But First, Set Clear Goals

Before you can do anything to increase your chances of success you have to know what you’re working toward.

If you don’t have a goal then nothing is going to help you. So first define success (aka your goals.)

A set of clear goals for a side hustler might be reaching a certain amount of prospects each week, finding two new clients per month, or connecting with a certain person in your field of work.

Make your goals specific and actionable. But most of all make them meaningful to you.

20 Percent is Vital, 80 Percent is Trivial

Now comes the important part.

You see, as a side hustler you can often let fear, embarrassment, or laziness stop you from taking action on the stuff that really matters. Instead you do the same things over and over and over even though they aren’t bringing any results. And you wonder why you aren’t gaining any traction.

The truth is that twenty percent of what you do is vital and the other eighty percent doesn’t even matter – it gets you nowhere.

Free yourself from all the busy work and get down to the real business.

Focus on the 20 Percent

To find that twenty percent make a list of your goals and then make action steps to take you there.

Every day when you’re about to work on your side hustle make a list off all the things you need to do. Try listing ten things.

Now go through the list and immediately mark eight of those things off. Concentrate on the two tasks that will make a real difference in your business.

Everything else can be delegated to someone else or can be done at a later time. You shouldn’t even think about doing the eighty percent until you get the twenty percent completed.

Practice the 80/20 Rule Everyday

There’s no reason why you shouldn’t have side hustle success.

If you can eliminate the busy work and instead focus on the tasks that are vital to your business you’ll be amazed at how quickly you reach your goals.

On top of that your stress level will go way down. When you start your working day by first getting the most important tasks completed the rest of the day will be a breeze.

Try it today.

Get out of your rut and change up the way you do things. In a year from now you’ll be so glad that you did!

RBS follow in the footsteps of the payday lenders

The Royal Bank of Scotland is the first of the UK’s high street banks to try and fill the glaring gap in its personal banking division by offering its customers ‘loans within minutes’ as part of a £1bn overhaul of its retail business.

RBS claims the move is in response to the ‘wake-up call’ the taxpayer backed lender has received from payday lenders such as Wonga, which have proven extremely popular in offering UK consumers a simple, easy and fast source of short-term credit. Although it clearly has a lot of catching up to do, RBS believes it can find a method of making affordable loans available in minutes, rather than days.

Making banking simple, easy and fair

Les Matheson, the newly appointed head of personal and business banking, is determined to make personal banking services more accessible to RBS’ customers. To do this, he has decided to adopt some of the practices currently employed by the UK’s leading payday lenders.

The recent £1bn investment in RBS’ high street division is a step in the right direction for the UK banking sector. However, it still remains to be seen whether banks will be able to compete with the payday lenders on price, given the proposed cost cap which will limit the total cost of interest and fees to 0.8 percent a day.

The new caps, introduced by the Financial Conduct Authority, are currently in the consultation period before they come into force in January 2015.

Hampered by regulation

Currently RBS are fighting against the regulatory tide to make their banking service simpler for its customers. Despite their best efforts there are a number of glaring stumbling blocks ahead.

In 2012, RBS suffered a catastrophic IT failure that left many customers unable to access their accounts. In fact, Matheson openly admits that improving RBS’ range of digital services will not be easy given the bank’s outdated systems, which “don’t talk to each other very easily”. This will represent a significant challenge given just how quickly and effectively payday lenders can make lending decisions.

There is also the challenge of overcoming and reversing the hapless image the banking sector currently has following the much publicised catalogue of scandals and disasters. While the payday lenders receive a hard time in the press, many have a loyal client base who are happy with the service they receive. On the other hand, the banks face an uphill struggle against customer dissatisfaction resulting from PPI mis-selling, the Libor rigging scandal, business loan mis-selling and the catastrophic mismanagement that resulted in the costly taxpayer bailouts in the first place.

Lending to those who need it the most

Speaking of the payday lenders, Matheson said: “When you look at why people use payday lenders – because they are simple, easy and fast – in that sense banks need to do a better job. We should be able to find a way to make loans available as quickly – in minutes, rather than hours or days or weeks.”

However, it seems RBS’ short-term loan products will not be in direct competition with the payday lenders after all. While Matheson hopes to appeal to the payday lenders’ existing customers by delivering convenience and speed, RBS will not offer the small sums of money the majority of people use payday lenders to access.

Currently the average payday loan amount is £260 borrowed over just 30 days. RBS do not plan to go in that direction. Not only will they offer higher loan amounts, they will also retain the strict lending criteria that excludes many of those who currently borrow from payday lenders. Rather than competing with payday lenders, they will offer an alternative source of credit for their existing customer base, whilst those most in need of short-term credit to cover the cost of essentials will continue to use payday lenders.

Do you think there’s a genuine need for the type of short-term credit option RBS will offer? Will this dent the demand for payday loans? We’d love to hear from you on this topic, so please leave your thoughts in the comments section below.