Managing A Financial Windfall

A person who receives a financial windfall might find themselves subject to a number of personal and financial problems. The problem with receiving a financial windfall is that the money itself is often treated differently than money that is earned. Most advisors would advice that a person should wait sometime before actually using the money so that the person has time to decide and plan on how to use his or her financial windfall. When a person is ready to start planning, they might want to consider the following:

• A person who receives a financial windfall might want to consider hiring a group of advisors, including a financial planner and a CPA to ensure that the person gets the most out of his or her money. 
• That person might also want to consider the tax implications on his or her windfall. While some financial windfalls will not incur a tax, such as receiving life insurance proceeds, others will incur a tax on the proceeds. It is important that a person not forget the tax implications of his or her inheritance.
• A person should probably not consider leaving his or her normal job. The money that a person receives from a windfall usually does not provide enough income so that a person can leave their job permanently.
• A person might want to take a windfall and invest the money in themselves. This can be accomplished in a number of ways, such as paying off student loans, starting a business, or paying off a mortgage.
• Finally, a person might want to consider using the money to have a little fun. The idea behind this is that a person is probably less likely to spend all of their inheritance on fun if they plan to spend some of the inheritance on something that is fun.

See Sandy Block, 5 Smart Steps to Manage a Financial Windfall, Kiplinger, Sept. 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.