We fantasize about being the recipient of large financial windfall: winning the lottery, getting a huge bonus at work, receiving an inheritance from a long lost relative. We dream about what we’d spend all that money on: luxury cars, oceanfront property, trips to exotic places. In truth, a financial windfall can actually be a source of stress if we are not operating from a detailed Financial Roadmap.
Happy woman sitting at the table with money
Certainly, we may receive an unexpected cash infusion from a positive source, such as a bonus, gift, or unanticipated tax break. However, not all windfalls are from such positive events. Your windfall could be collecting on an insurance policy or an inheritance due to the death of your spouse, sibling, or parent. Perhaps your cash infusion is due to a divorce or other legal settlement. It’s during these emotional times that our risk of making bad financial decisions skyrockets. Whether your windfall is from a positive or negative source, there are common steps to take to ensure that you’re going to use the money wisely.
Ensure that you have your Financial Roadmap in place. It’s a mistake to not have a budget set up and your debt reduction and savings goals spelled out. If you don’t have a plan, you may end up wasting money from a windfall.
Consult someone who can objectively look at your entire money situation such as a financial coach, CPA, or financial planner before making any major decisions. There may be unforeseen tax consequences or liabilities related to your windfall that you need to be aware of. Well-meaning friends and family will likely offer their opinions and advice; however it’s wise to consult an expert who has a handle on all of the moving parts of your financial picture.
Make a prioritized list of what to do with the windfall. If you don’t have a 6-month emergency fund or you have consumer debt, those need to be at the top of your list.
I strongly recommend against making any major money decisions, if at all possible, within the first six months of a traumatic event that leads to a windfall. Your first priority is to take care of yourself and your family.
No matter the source of a windfall, be sure to consult with a trusted money advisor and postpone big decisions that could be in the heat of emotion.
If the windfall is due to a negative event, such as the death of a loved one, I strongly encourage you to seek the help of a counselor or therapist. When I have a client who is dealing with the death of a spouse or other loved one, I highly recommend that they seek out counselling or a grief support group. There are times when postponing a money decision can indeed be the best decision.
I also highly recommend checking out the book, “The Sudden Wealth Solution: 12 Principles to Transform Sudden Wealth into Lasting Wealth” by Robert Pagliarini.
Christine Luken is the Financial Lifeguard and a veteran Meal Planner. She helps individuals, families, and entrepreneurs design a financial road map to help them arrive at their Preferred Financial Destination.
