Resist the urge to splurge if you suddenly get more money

It is important to resist the urge to splurge if you suddenly run into more money, whether it is from your bonus, a welcome gift from the taxman or an inheritance from a dear family member.

“If we had to rank the most emotional conversations in our lives, money would rank pretty high on that list for most of us. Our emotions can too often get the better of us, especially when it comes to spending, Cebile Zibi, chief marketing officer at Momentum Money, says.

What we want money for and what we need it for is not always the same thing. Therefore, Zibi says, when you receive an unexpected financial windfall like an inheritance or a bonus, too many of us immediately plan how to spend it all.

“If you have ever caught an episode of the show ‘I blew it’, you will know how easy it is to throw money down the drain through frivolous spending. Even in America, stats from the National Endowment for Financial Education reveal that 70% of lottery winners either end up broke within the first few years or some even declare bankruptcy.”

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Anybody can spend, but who can navigate unexpected opportunities?

We have all witnessed these moments: people squandering their 13th cheques, annual bonuses, tax payouts, annual increases, lottery winnings, insurance payouts, inheritances and RAF claims. Zibi says these moments are not as rare as you think. They can happen to anyone but the key lies in how we navigate these unexpected opportunities.

“When faced with more money than we are accustomed to handling, it is too easy to be tempted by impulsive decisions and emotional spending. In the fast-paced, complicated and stressful world of finance, emotions often take the driver’s seat and we have to protect our hard-earned money and maximise its potential for long-term success.”

Zibi says at Momentum Money they say, ‘Don’t Blow It, Grow It’. “This is more than just a slogan. It is a call to action for South Africans to break free from impulsive reactions and embrace a mindset focused on strategic financial planning. As individuals, we must all acknowledge that how we manage our money today is shows our ability to manage larger sums in the future.”

In the absence of knowledge and experience, emotional and irrational decisions can lead to long-term financial detriment, she warns. “As consumers, we must take a step back, assess our financial landscape and invest the time needed to secure a stable financial future.”

A large sum of money suddenly injected into your bank account can do a world of good for your financial future. If you can resist the urge to splurge your new-found wealth, Zibi says it is a good idea to consider these steps to make money-savvy decisions:

Pause and reflect

Before you do anything rash, the best thing you can do is take a time out, pause and reflect on what you can do with your money. In the meantime, put it in a digital savings account that can generate interest and grow the money.

Establish clear goals

Before embarking on any financial venture, set clear and realistic goals. Whether it is paying off debts, investing for the future, or creating an emergency fund, having well-defined objectives helps to guide your financial decisions.

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Tap into the right advice

Engaging with a financial adviser can provide valuable insights tailored to your unique circumstances. Their expertise can assist you in making informed decisions and optimising your wealth for long-term growth.

Emergency fund

Before diving into significant financial commitments, prioritise building an emergency fund. This safety net ensures you are prepared for unexpected expenses and it safeguards your overall financial stability.

Debt management

If you have outstanding debts, consider allocating a portion of your windfall to debt reduction. Reducing high-interest debts can significantly improve your overall financial health and increase your capacity to invest in the future.

Zibi says as you think to yourself about your money and what you plan to do with it, remember that it is not just about numbers. It is about dreams, aspirations and a lasting legacy that you want to leave behind.

“Sometimes you only get one chance to seize an opportunity and set your life on the path to success. I will say it again: don’t blow it, grow it! Your future is in your hands. Pause and reflect, have the right conversations, be honest with yourself, do not spend with your heart and you should be well on your way to a money-smart future.”