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What to Do with Sudden Wealth

With care, a sudden financial windfall could leave you set for life.

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Many people dream of sudden wealth, whether it's a lawsuit judgment, winning the lottery or being the sole beneficiary of a wealthy relative's will. No matter where the cash came from, suddenly, you’re rich!

If you're the recipient of a sudden financial windfall, what do you do? Do you pay off debt? Help members of your family? Support a local charity?

Depending on the amount, you could be set for life. If you're not careful, though, it could all be gone in a few short years and all you'd have left are memories.

Here are some tips on handling sudden wealth.

  • Spend a little to get it out of your system. Put the rest aside and keep a low profile. Give yourself 3-6 months to think about what you really want to do.

  • Be careful. Sudden shows of wealth like an expensive car or home sends a message to potential thieves and scammers.

  • Set aside some for taxes. Your sudden wealth may have substantial tax consequences.

  • Protect your new found wealth. Invest carefully to grow the money so it lasts a long time.

  • If you decide to help family members, use caution. Nothing can divide a family faster than money.

  • Lying on the beach or golfing all day may sound nice, but it will get boring. Keep up your regular work routine or become a volunteer.

  • Work with trusted advisors. If you worked with financial advisors, attorneys or tax preparers before your financial windfall, stay with them. You already know you can trust them.

  • Don't quit your job. Figure out how long your new found wealth will last.

  • If you have a will, update it to take into account sudden money. If you don't have a will, get one.

  • Be kind – donate to charity.
Sudden windfalls can put you on the road to financial security, but if carelessly spent, they can leave you with nothing. Enjoy your sudden wealth, but enjoy it wisely.

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