What to Do with Sudden Wealth
With care, a sudden financial windfall could leave you set for life.
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.