What to do with a windfall?Q I recently won a new car worth more than $25,000 in a contest, then sold it. What would be the best thing to do with that money? --Ayanna G. Williams Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. A You don't want to rush into anything just because you've pocketed a windfall. First of all, you should realize the tax consequences of your prize. The money you received from the sale of your car is taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . So, if the car you won had a value of, let's say, $50,000, and you were able to sell it for $25,000, you would be taxed on the amount that you gained from the sale. If you don't already have one, seek out a topnotch financial planner Financial Planner A qualified investment professional who assists individuals and corporations meet their long-term financial objectives by analyzing the client's status and setting a program to achieve these goals. . Such an advisor will help you analyze your financial status by developing a statement of financial position, an assessment of your assets and liabilities, and a cash flow document, which includes such inflows as your wages, investment income and the sale of your car, and outflows, such as mortgage, insurance and living expenses. Once that data has been gathered and you review your financial goals, the planner can help you determine whether a portion of your converted winnings should be allocated to pay off debts or placed in such instruments as stocks, bonds or mutual funds. The Yellow Pages, however, are not the best place to look for a financial planner. Contact the Institute of Certified Financial Planners Certified Financial Planner (CFP) A person who has passed examinations accredited by the Certified Financial Planner Board of Standards, showing that the person is able to manage a client's banking, estate, insurance, investment, and tax affairs. (800-282-PLAN or www.icfp.org) or the National Association of Personal Financial Advisors National Association of Personal Financial Advisors (or NAPFA) is an American organization created in 1983 to aid the field of Fee-Only financial planning by encouraging interest and establishing a new level of professional standards and reputation for excellence. (888-FEE-ONLY or www.napfa.org) for a list of potential advisors. Mail your finance questions to Ask B.E., Black Enterprise, 130 Fifth Ave., New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , NY 10011, or send an e-mail to dingled@blackenterprise.com. |
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