6 Tips for Managing Unexpected Wealth
No matter who you are, there’s a chance you could end up with an sudden, unexpected amount of money. You may inherit real estate or money from a deceased relative, you could win the lottery, or you could make an investment that really pays off. It might seem ridiculous to think about now, but it’s a real issue that many normal people encounter for whatever reason. Studies have shown that if you win the lottery, your chances of bankruptcy actually go up, but the people who plan ahead are usually able to hold onto their money. Even if you don’t receive some kind of windfall, it’s smart to take a look at your finances and plan how you’ll manage them.
Take time to adjust
The first thing you should do when receiving a windfall is take time to adjust to what’s happened. You’re likely going to experience some form of a lifestyle change, no matter how you plan to allocate your money. Figure out exactly how much money you now have, how it applies to taxes and financial planning, and begin thinking about what you’d like to do with it.
Resist the urge to spend
You will very likely feel the urge to spend a significant amount of money purchasing a new car or upgrading your house, even if you don’t need it. Resist this urge! This mistake is one of the biggest that leads to people losing all their money. If you received a million dollars, it might not seem like a lot to spend $60,000 on a new car, however, it’s better to try to keep everything as normal as possible until you have time to plan out how you’re using your money. Do not make unnecessary purchases that chip away at the windfall.
Manage family issues
Depending what kind of family you’re in, your relatives might suddenly expect you to give them large sums of money because they think you can afford it. You might also get this attitude from your friends. While you shouldn’t be stingy with your money, you need to draw a line somewhere. Have a plan in place how much money you’ll give to other people, who those people are, and then be clear that you’re not doing more. It might sound selfish, but you want to plan for yours and your children futures, not buy your best friend a new house when they’re financially stable.
Find professional help
As soon as you’ve had time to adjust to your windfall, begin researching and speaking with financial professionals who can advise you on how to manage your money. Make a plan, such as what you’ll give away, what you’ll invest, and what you’ll use to pay off debt or make an important purchase.
Make a careful plan
Once you’ve chosen a financial advisor, begin making concrete plans. Decide how you’re going to use your money, how much you want to pass onto your children, and how much you can spend a year to make it last. You probably won’t be able to quit your job so avoid immediately leaving the office. Plan what you want the rest of your career to look like and how much money you need to live on.
Regularly monitor it
After you’ve put your financial plan into place, you can continue with the rest of your life. Remember to regularly check on your money and make sure it’s being managed properly. Avoid overspending and pulling out more than you planned to, unless there’s a serious emergency. If done correctly, you can make this sudden wealth benefit you for years and often pass some of it onto your children.