Getting a large sum of money can be exciting and stressful at the same time. Most people have never dealt with huge sums of money and not making mistakes can be challenging. And while others believe that a bunch of money will solve all their problems, the lottery has shown that that simply isn’t the case. Studies show that 33% of all those that have won the lottery end up going bankrupt. A windfall is far from a fix-all but can be a huge help in our financial life.
Here are a couple of things to think about if you have a large sum coming your way.
- Take a Step Back
These sort of life events can be very emotional, especially if they are accompanied with a loved one passing away. It often makes sense to wait for things to settle down before you make any big decisions. This will give you the time needed to think clearly about what to do next.
- Get Out of Debt
A windfall can be a great way to pay off your debt. Start with your highest interest rates and go from there. It is important to remember however, that your financial habits up to this point are what have gotten you to where you are today. Even with a bunch of new cash, if we don’t change our underlying habits, we will end up in the exact same place that we were before. If you weren’t in a good financial place previously, figure out what you have to do to not fall back to where you were.
- Plan for the Future
The joy from a windfall will be short-lived if we don’t save any of it for the future. Think about your goals with regards to retirement, children’s schooling, vacations, charitable giving, or anything else that is important to you. Think about what is necessary to fund these goals and how you can save and invest now to get there.
- Get Help
Depending on where you are receiving the money, a windfall can put you in a much higher tax bracket. A pro would be able to walk you through the strategies to save a potentially large amount of money in taxes. Some windfalls (such as life insurance proceeds) are generally received tax-free, but it never hurts to talk to someone to make sure.
Especially if managing your finances isn’t your strong suit, it may make a lot of sense to get help from a professional. They’d be able to help you make the decisions to not only enjoy your new wealth in the present but also to make sure you are ready for the future.
Conclusion:
A windfall can improve your financial life in many ways but only if you are mentally prepared to be smart and manage it wisely. Doing so can not only bless your life but the lives’ of those around you as well.