You just received a windfall. Now what?
How to make smart decisions following some great news
You didn’t expect it, but you’ve just gotten some great financial news. Maybe it is an inheritance you didn’t see coming or a business that sold for better than you’d hoped or a family heirloom with an unbelievably high market value. Whatever the reason, you’re better off than you were a week ago, and you have to make some decisions about how to manage your windfall.
Once you’re finished hugging your spouse or your nearest loved one, it is time to get to work planning on what to do next. We’ve got some information on an orderly progression of steps you can take to make the most out of your good news.
Step one: Assess your current financial standing and your goals
While bad news can be a cause for you to assess your life, extremely good news can do the same thing. If you want to make the most out of your good fortune, you’ll have to be really clear on what you want you already have and how you want your money to add to that.
What does this look like in actuality? Just as you would do for any other kinds of financial planning updates, such as retirement planning, consider how far you’re on track for some of your larger goals. If you’re saving for college for your kids, do you feel that you have enough tuition monies set aside? Are you happy with your target retirement date or would you like to move it up some?
Are there live experiences you’d been hoping to have, including travel? Are their large purchases you wanted to make, such as real estate holdings? These are all things to consider in terms of your current financial situation.
Step two: Identify financial professionals to help you
Once you’ve taken the time to personally reflect on your situation, it is time to ask financial professionals to weigh in. While you may already be aware of the people you want to work with, it is equally common for people to use their personal or professional networks to discretely ask for references. Be sure that anyone you choose is someone you’re comfortable working with, provides strong references, and has otherwise been thoroughly vetted by you.
“Be sure that anyone you choose is someone you’re comfortable working with, provides strong references, and has otherwise been thoroughly vetted by you.”
What kind of help are you looking for? As expected, the type of service you need will likely depend on the amount and type of windfall you’ve received.
Generally, you’ll need an accountant who can help you track your finances and manage the tax implications of your new funds. You’ll also likely want to identify an investment professional who can help your money grow in the future.
You may also need a financial planner to help ensure that you’re making decisions that keep your goals on track. Or, you may want to seek out a lawyer to navigate any legal implications you might be facing.
Step three: Test your decisions before finalizing plans (and rush into nothing!)
As you’re figuring out what to do, resist the temptation to rush into anything. A quick decision or an impulse move can cause your money to disappear as quickly as it came.
In addition, before you finalize your financial roadmap, take the time to test out your planning and see if what you want to do holds true under difficult, though possible, scenarios. For example, if there’s a bad turn in the market, how does that affect the status of your investments and your net worth? Your financial professional should be able to help you find this out.
A deeper dive – Related reading from the 101:
- Financial planning as a couple | Finance 101
Planning with someone else is different than working solo. We’ve got tips to make it easier.
- 5 pieces of financial advice an advisor wishes he could give his 20-year-old self
What he suggests may surprise you.