How to Handle Sudden Wealth
Sudden wealth can be a result of many different situations; inheritance, sale of a business, and even divorce. Any of these financial windfalls can also be accompanied by an emotional burden. How do I honor the loved one that left me the money? How do I honor myself by taking care of the hard-earned money I made from the sale of my business? How do I make sure my divorce settlement money lasts as long as I need it to?
Having a game plan is the best way to help relieve the burden. Make a chart of the goals for the money. What are the long-term goals? Is it to make sure you have enough in retirement? Is it to eventually give some away to charities? Is it to leave some money for the next generation? Then look at the medium-term goals. Is there an amount that you want to bridge your financial needs until another event happens? Is this for a large asset purchase in the next 5-10 years? And finally, what are the short-term goals. Is it to pay-off some debt? Is it to invest in yourself for another opportunity (i.e. educational needs)? Is it to supplement or wholly live off of for monthly needs?
Each goal will have a different investment need. Long-term money can and should be invested to make sure the money grows to meet those needs. The medium-term goals may need to be invested a little more conservatively to grow prudently but remain less volatile. The short-term goal money needs to be liquid and stable.
Hiring a professional whose day job is what you are not an expert in is important. I hire a realtor because I believe ultimately I will end up with a better outcome and with less stress. I hire a CPA so I know my taxes are done accurately. I hire an estate attorney so I know my financial affairs will be taken care of appropriately after I am gone. And finally, I hire financial professionals so I know my money is being invested appropriately for all of my goals. It is often hard to spend money on professional services where you do not “see” the immediate benefit of the money spent. However, one cannot overlook the benefit of peace of mind knowing you are being prudent with your financial decisions. A sudden wealth event calls for setting up your team of professionals.
If you need referrals for any of these professionals in your area, please contact me and I can help you locate one and/or talk you through your financial goals.