Inheriting money, winning the lottery, getting a settlement—all of these financial windfalls can make it feel like you’ve found the “easy” mode for living. But eventually, you may begin to feel overwhelmed with all this money and panic at the thought of what you’re supposed to do next. Here are a few tips that can ensure your wealth stays with you for decades to come.
Hire professionals to help you
Handling your newfound wealth is beyond the scope of your dad, who’s always done your taxes, or that family friend that took accounting classes in college. Granted, filing a free tax return is easy enough to do on your own. However, when wealth is factored in, the concept of filing taxes becomes a little different. Your money should be seen as a business of its own now that requires dedicated professionals to help manage it.
Your team of professionals should each come with references and a background check. Check your state bar association for disciplinary records, the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), and the state board of accountancy. These background checks should be free or relatively low-cost and are non-negotiable.
The professionals you hire will be able to use the money you’ve acquired to keep you from losing it all. They may put you on something like the snowball debt plan so that your money isn’t lost to interest penalties, rework your investment and tax strategy, or handle your monthly expenses so that you’re never left without. Depending on how much money you get, you may want to go as far as having a Family Wealth Office, which is a team of professionals that handles only your money and no other clients. These are typically reserved for extremely high-net-worth individuals like the 1%, so don’t feel like you need to have one to handle a few million in assets.
Decide what your life looks like on your terms
Your team of advisors may have a boilerplate lifestyle they recommend to their clients as a way to streamline their work. Don’t feel like you have to accept their recommendations if they don’t feel right; remember that it’s their job to make your money work the way it needs to so you can have the successful life you want to. But first, you’ll need to decide what that life looks like.
Consider things like the vacations you want to take, charitable donations you want to make, how you want to provide for your kids and help out your family, where you want to live, etc. Come to the table with these ideas in mind and see what can be done to make them happen. You might need to compromise here and there, but don’t forget that your wants come first. If a financial plan doesn’t feel right, say so. Remember that while you’ve hired experienced professionals, you’re still the boss.
Deflect friends and family to an advisor
One of your first instincts may be to help your loved ones with their own financial situation with your new wealth. While this is incredibly generous, it’s also a dangerous path to go down as you’ll soon begin to see estranged friends, family, and even strangers coming to you with requests to help solve their problems.
You may feel guilty or obligated to help, but this can become a slippery slope that leaves you broke. Instead, have your financial advisors handle these requests. You can allot a set amount of money for family help or set up a trust fund that ensures your family is taken care of, but don’t try to handle taking care of the people you love on your own. This can open you up to not only requests for charity but frivolous lawsuits or even threats to your life. Leave it to the professionals and blame any denials on them. They’re used to dealing with these kinds of requests and will know what to do.
Don’t drastically change your life
Lifestyle creep can sink a nest egg faster than you think. While you can give your life a few upgrades, don’t jump into buying a 10,000 sq ft house or Lamborghini Countach because you feel you can afford it. Many lottery winners have fallen into this trap only to end up declaring bankruptcy within a few years. It’s more vital that you use the money as a long-term security net that keeps you comfortable for decades than burn it all on a lavish lifestyle you’ll need to liquidate later. But, in case where you might file bankruptcy, you can check https://www.kanialaw.com/tulsa-attorneys/tulsa-bankruptcy-attorneys for consultation.
The bottom line
Getting an avalanche of new money into your life can be a double-edged sword that feels both elating and overwhelming. If you’ve received a sudden cash infusion and are wondering what to do, refer to this guide so that you can live the life you want without worrying about money ever again.