A financial windfall happens when you receive a large amount of money – either through an inheritance, a retirement payout, a large entertainment or sports contract, a personal injury settlement, a lottery win, a divorce decree, a sale of your business, selling stocks, or any other means. Sometimes a financial windfall may be expected (your divorce is almost final and you know the settlement will be large) or a complete surprise (your start-up business is suddenly purchased for an amount you could have never dreamed).
No matter how the money is received, a large financial windfall will change your life. Many people who receive financial windfalls end up losing the money within a few years. But there are ways to help yourself manage the money to create financial wealth for yourself for life.
Give yourself some time.
Depending on the source of your new money, you may be dealing with a lot of emotions – grief if the money came from a life insurance policy from someone you loved who died, anger and distress if you received the money from a recent divorce, or shock and joy from a sudden business sale. One gift you can give yourself is the gift of time. Take enough money to cover your living expenses for 6 months or a year and keep that money separate from the rest of your financial windfall. Know that you have time to decide what to do with the rest of the money. Very few things need to be decided right away – you might need to pay taxes in a timely fashion, but many other decisions can wait.
You may want to enlist the help of professionals, such as a financial advisor, accountant, tax preparer, and estate planning attorney to help you navigate your sudden wealth. You will want to gather a team of trusted professionals that will work with your best interests in mind. Interview each candidate to determine their experience level with other clients who have significant financial assets.
Beware of impulse buying.
We all have big wish lists for what we’d buy if we had the money. Now you do have the money! But the quickest way to end up losing it all is by impulse buying that can occur if you think the money will never run out. Better to make a list of everything you might want – a new home, a new car, a month-long vacation, the ability to pay your children’s college education, a large donation to your alma mater – and then tuck your list away somewhere for several weeks or months. Again, give yourself time. Take the list out later and assess it against your financial plan.
Learn to say “no.”
You may find yourself getting repeated requests for money – from friends asking for loans, to entrepreneurs asking you to invest in their business, to family members wanting you to share your new wealth. You may need to say “No,” or “Let me think about it,” or “Let me talk to my advisors.”
Develop a financial plan.
As you transition into your new life of sudden wealth, take the time to develop a financial plan with your trusted advisors that fits your lifestyle and allows you to honor your goals and purpose in life. A sudden influx of money can be overwhelming, but as you learn more about money management and put your plan in place, you may find that you are able to build financial security for life with the windfall.
Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.