Could You Handle a Financial Windfall? Receiving a financial windfall is often a life-changing event. It's a relatively common one, too. You might never win the lottery, but the odds are that at some point you'll receive a significant amount of money, perhaps from an inheritance, bonus, insurance settlement, or the sale of a home or business.
If so, would you be prepared for the financial decisions you might suddenly face?
Proceed with caution The first thing you'll want to do after receiving a large sum of money is to take a deep breath. You may feel the urge to spend, invest, move, quit your job, or give to others.
But if you want your windfall to last, don't do anything until you've had a chance to come to terms with the personal and financial consequences.
Regrettably, some people who suddenly come into money lose it all within a few years because they fail to plan. Taking the time to make well-thought-out financial decisions will help ensure that your money will last.
Read More Link on Right
Put your money somewhere temporarily Until you've had time to explore your options, there's nothing wrong with putting a lump sum into a relatively liquid account, such as a savings or money market account.
You don't have to leave it there forever--just set it aside until you've had time to formulate a plan.
Assemble a support team Because your finances are likely going to be a lot more complex now, one of the first things you should do is to get unbiased advice from a financial professional who can help you put together a financial plan.
You may also need to work with an accountant, an attorney, or an insurance professional who can help address any tax, estate planning, or insurance planning concerns.
Although receiving a windfall should be a happy event, it's sometimes very stressful, and you may need help from trusted professionals to help you handle the pressure.
Avoid spending and giving impulsively Spend or give your money away too quickly and you risk depleting your nest egg. Although it's tempting to go out and buy something you've always wanted but couldn't afford before, watch your spending.
A financial windfall can turn even a financially conservative person into an impulsive shopper. If your ultimate goal is to create lasting wealth, take time to consider your future needs, not just what you need (and want) today.
What about giving or loaning money to family and friends, or making a charitable donation? Again, it's best to wait until you've set priorities and developed a financial plan. Otherwise, your personal relationships could suffer (will your sister be hurt if you give $10,000 to your brother?), and your generosity might have unintended consequences (will you be approached by dozens of charities once you donate to one?).
Watch out for too-good-to-be-true opportunities Unfortunately, more than one person has become the target of unscrupulous individuals looking to profit from the good fortune of others.
And even if you're approached by a well-meaning friend, family member, or business associate, you should thoroughly investigate any investment or business opportunities presented, instead of relying on someone else's judgment.
If you have trouble saying no, consider referring any requests you receive to a third party, such as an attorney or financial professional you're working with.
Look at your financial needs and goals An important part of handling a financial windfall is to evaluate your short- and long-term needs and goals. This will serve as a foundation for your financial plan.
There's no reason to deprive yourself, as long as you've taken care of business first. If you plan well and control the urge to spend lavishly, your windfall may provide you with financial security and comfort for many years to come.