Whether from an inheritance, the sale of a business, or a lottery win, suddenly having access to money you weren’t expecting can be nothing short of life-changing.
The positive aspects of sudden wealth scarcely need to be stated. Financial security, the ability to help those less fortunate, and the chance to pursue a long-delayed dream are just a few of the many potential advantages of new money. Along with all the amazing aspects to a windfall, many people feel stressed, overwhelmed and even guilty. My first piece of advice to any client is to take some time to let it all set in. There is no rush to make a big decision just yet – allowing some time to adjust is really the best decision.
This is not to say that you shouldn’t enjoy your money, rather take care of business first, making sure you understand all the implications for your newfound wealth. Your most important job is to figure out how to manage and invest your money so it can match your dreams.
Step 1 - Build your Wealth Financial Team
While you may be in unchartered waters, you’ll want to create a financial team composed of people who live and breathe in these waters. They can help you navigate the numerous tax, financial, and legal issues that arise. This is the first step because there may be time-sensitive opportunities to deal with immediately that can help you save or defer taxes. You will need a financial advisor, a lawyer, and an accountant to start.
Step 2 – Draw up your Wish List
Brainstorm all of the things you want to own and do. Don’t hold back.
After you create the list, categorize every item as a “Would Like” or an “If Possible.” Would Like items are things that are important to you such as buying a new home and paying for your children’s education. If they’re not already on your list, I would add “pay off debt” and “save for retirement” to this list. If Possible items include everything else: travel, gifts to family members, and quitting your job.
Once you’ve brainstormed everything you want to own and do, rank those items in terms of importance.
Step 3 - Design your Wealth Plan
Once you’ve assembled your wealth management team and separated out your financial needs and wants, it’s time to put a solid plan in place.
As a Certified Financial Planner, I work with you to build your wealth plan. I help you determine how much you can safely withdraw annually if any, how much you want to invest (and your risk tolerance), and how much you want to set aside for retirement.
We then work through your wish list, and determine what is feasible, and what might put your plan at risk. Other things you might consider include how much you want to leave to your heirs, charities, etc. The details of your plan will depend entirely on your unique situation, so again, make sure to carefully research your options and get advice from your team before making any major commitments with your money.
