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
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. 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 top-notch financial planner. 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 (800-282-PLAN or www.icfp.org) or the National Association of Personal Financial Advisors (888-FEE-ONLY or www.napfa.org) for a list of potential advisors.