New York, NY (PRWEB) July 24, 2014
Debt Consolidation USA shares in a recent article published last July 18, 2014 some of the pitfalls of having windfall profit. The article titled “3 Pitfalls Of Windfall Profits” lays out some of the most common traps that unexpected earnings bring to a consumer.
The article starts off by defining that windfall profit is an unexpected surge in profit. It is an un-budgeted amount that can sometimes come in when the person least expects it. The most popular source of windfall profit could be a performance bonus at work, a tax refund, financial gifts from relatives and even winning the lottery.
With the unexpected money, consumers are oftentimes in a dilemma on how best to use it. This usually leads to knee jerk reactions that run the risk of losing the money faster that they can think of ways to save it. The article helps consumers out by highlighting these initial reaction to windfall profit so people can manage expectations better.
The first thing that people usually do with money that is unexpected is spend on present rewards. There is that desire to reward oneself immediately after getting a performance bonus. The idea is that the hard work begets a reward at the end. There is nothing wrong with this notion and it can actually help a person perform better the next time around. The problem lies with overdoing it.
Rewarding has to be commensurate with either the work done or the windfall profit, whichever is smaller. It does not make sense using up the entire amount for a trip that will only last for a few days. Allotting just a portion of the money for a reward is better than blowing off the whole amount It would be better to put most if it in a savings fund, retirement fund, emergency fund or other investments that can yield profit in the future.
The article also shares that most people are quick to undergo a lifestyle upgrade as soon as the money comes in. Even if it the money is coming from lotto winnings, upgrading the lifestyle can shorten the possible uses of the money. Especially so if the jump on lifestyle is from middle-income living to buying a mansion and having a garage full of sports cars. When the funds are depleted, there will be nothing to sustain the lifestyle and the consumer would be forced to go back to the way things were.
To read the rest of the article, click on this link: http://www.debtconsolidationusa.com/personal-finance/3-pitfalls-windfall-profits.html