In some ways, it’s the stuff of people’s dreams: coming into a lot of money overnight. Maybe you win the lottery, despite the ultra-long odds. Maybe a relative of yours dies and leaves you millions as part of their will. Or perhaps you sell a business, and the reward for all your hard work is a seriously enlarged bank account.
Whatever the reason for the newfound wealth, you have to deal with a very short, yet very profound question: What next? A financial windfall can be lifechanging. But it’s important that you give careful consideration to what to do with your fortune. Here are some tips for if you find yourself in this situation:
Rash Decisions Are Not Your Friend
Seeing a massive amount of money in your account may get you thinking about all the fun and exciting things you can do with it. Whether it’s new cars, luxury vacations, or a chic French chateau, it’s understandable if you feel tempted to put the new cash to work pronto.
As with many things in life, though, taking a deep breath can be the better option. You can always splurge in the months and years to come, but at least give yourself the time and space to think about the best way to handle the money. As one article notes, the typical person who receives a windfall is back to square one within five years. It’s not tough to imagine why this is the case: Human beings can be impulsive creatures, and unless you’re Jeff Bezos, spending all of your money is very easy to do.
Think about Spending vs. Saving vs. Donating
Everyone can do one of three things with their money. They can spend it, they can save it, or they can give it away. And truth be told, most people want to have some balance between all three. If you encounter a windfall, give some thought to how much you’re comfortable spending, how much you’d like to save, and how much you’d like to give to worthy causes. Everyone will have a different answer, of course, and that’s ok. As an aside, you don’t need to feel guilty for indulging a bit (life is meant to be enjoyed, after all!).
It Pays to be Discrete
When people win the lottery, it’s public information. And that means everyone from former classmates to professionals seeking new business may come calling. But if your windfall arises in a more private nature, there’s a lot to be said for keeping it that way. If you start telling friends and family all about your new status, there’s no putting the cat back in the bag. Discretion can protect you from those who just want a slice of your wealth. It also gives you more time and space to use the money on your terms, shielded from the envious glare of others.
Seek Expert Advice When Necessary
Windfalls can create all sorts of financial headaches. The good news, though, is you don’t have to answer them alone. Whether you’re looking to invest some of the money, make some changes to your will, or have a complex issue, don’t be afraid to seek the counsel of trusted professionals. It’s familiar ground for us, and we’re happy to help.
References:
Marie Engen, Managing a Financial Windfall: https://blog.cidirectinvesting.com/managing-financial-windfall
E. Napoletano, 8 Tips for Managing a Financial Windfall: https://www.forbes.com/advisor/personal-finance/tips-for-managing-a-financial-windfall/
This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances.
Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.