7 Considerations When Managing a Financial Windfall

Benjamin Haas |

Financial plans tend to change when a client receives an inheritance or some sort of financial windfall. It could be the sale of a business or maybe a substantial signing bonus at a new job. More commonly, it’s an inheritance from a loved one. New considerations come with new wealth. In some ways, the newfound money may feel like a huge responsibility or even a burden with strong emotional ties. Regardless of the source, here are a couple things to consider if you find yourself with new money on your balance sheet.

  1. Park the cash – give yourself time. Don’t rush into any decisions, especially those that might be irrevocable. Instead, buy a short-term CD so it isn’t as easy to access while you plan. It’s not about the interest you’ll collect. It’s about protecting it. From yourself.
  2. Cut debt and build a safety net. Go back to the fundamentals of planning to ensure your fiscal house is in order before considering long-term goals and big expenses. Cut high interest debt (maybe not the mortgage) increase your personal liability insurance and keep a cash reserve for future emergencies or opportunities.
  3. Boost your savings. Instead of spending, invest in your future; maximize retirement contributions, college savings, set aside money earmarked for major purchases within the next 2-3 years. In other words, don’t kill the goose that’s now laying your golden eggs.
  4. Keep your job. Don’t over-estimate the income power of the investment. Gradually increase your standard of living, ensuring that it’s sustainable. One way to do this? Spend only from the income your inheritance produces, as opposed to cutting into principal.
  5. Learn to say, “no.” Windfalls are sometimes public knowledge. You may be asked for handouts or feel inclined to help others. While admirable, there will be a time for giving. Be sure to do your planning first, before saying, “yes” to others.
  6. Consider fees and taxes. Oftentimes, the more you spend the more you pay. Understand the taxable nature of any windfall so you don’t get caught with large tax bills or tax penalties that perhaps could have been avoided.
  7. Indulge yourself - a little.

If that sounds like a lot to do on your own, then the easiest answer is to consult an advisor. CERTIFIED FINANCIAL PLANNERSSM like myself are here to help align your values, vision and new wealth and discuss the pros and cons to your options. We’ve been through these situations with our clients and would be happy to help you too.


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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Securities offered through LPL Financial, Member FINRA and SIPC. Investment advice offered through U.S. Financial Advisors, a registered investment advisor. U.S. Financial Advisors and Haas Financial Group are separate entities from LPL Financial.